Observer Suggests Immediately Lifting Ban On Exports Of Crude Palm Oil And Migor: Because It Has Negative Impact On 3 Million Farmers

Illustration. (Photo: Doc. Antara)

JAKARTA - The ban on exports of crude palm oil (CPO) and cooking oil has had a multiple negative impact, not only on palm oil business actors but also on 3 million oil palm farmers in Indonesia.

In addition, Indonesia's macroeconomic performance is threatened due to the decline in foreign exchange exports so that it can be a factor that depresses the rupiah exchange rate against the US dollar.

Director of the Center of Economic and Law Studies (Celios) Bhima Yudhistira reminded that the government must immediately lift the ban on CPO exports. Because the policy has more negative impacts, instead it can be a strategy to control cooking oil prices.

"The excess supply of palm oil which has been absorbed in the export market is impossible to absorb in the domestic market. Immediately lift the ban," said Bhima in Jakarta, quoted from Antara, Friday, May 13.

He said one of the real impacts of the export ban policy was a decrease in the price of FFB (fresh fruit bunches) for oil palm farmers.

Another negative impact, the low absorption of CPO due to the export ban, has depressed FFB prices. In fact, a number of palm oil mills in the near future will find it difficult to receive FFB from farmers because the CPO storage tanks are starting to fill up.

From field observations, the decline in the price of palm oil FFB occurred in almost all regions after the ban on exports of CPO and its derivative products two weeks ago.

In South Sumatra, farmers' FFB prices fell by around Rp. 500 per kilogram. In Riau, the drop in FFB prices reached Rp1,000 per kilogram to around Rp2,900 per kilogram.

The decline in FFB prices also occurred in other central areas of oil palm plantations, such as Jambi, Kalimantan and Sulawesi.

"This export ban policy is not effective in ensuring the stability of cooking oil prices because the cooking oil problem is actually a distribution issue, not raw materials," said Bhima.

In addition to having a negative impact on oil palm farmers, Indonesia's macroeconomic performance is also threatened. In 2021, the contribution of foreign exchange for palm oil exports will reach US$35 billion or more than Rp500 trillion and palm oil will become the largest contributor to foreign exchange exports.

Apart from export foreign exchange, palm oil exports also contribute to the state treasury in the form of export taxes (export duties) and income from export levies.

This decline in palm oil export earnings has the potential to suppress the trade balance surplus and threaten the stability of the rupiah exchange rate against the US dollar.

"With the price of CPO in the international market being very high while the domestic market is low due to oversupply, it will trigger smuggling. This will make the dynamics of the national palm oil industry more complicated and complicated," said Bhima.

Meanwhile, Prof. Petro Paganini, a commodity expert from John Cabot University in Rome, Italy, said that amid the global shortage of vegetable oil due to the war between Russia and Ukraine, the world had no other choice but to look for palm oil.

Even in European countries, various food companies have started using palm oil as a raw material and some food products in Europe have removed the "palm oil free" label.

"It is inevitable that the world needs palm oil. Moreover, if the world is concerned with sustainability issues, the choice is to develop palm oil because oil palm plantations are much more productive than other vegetable oil crops," Pietro said in a discussion with industry stakeholders. Indonesian palm oil in Jakarta, Wednesday 11 May.