RI needs to diversify CPO products

Indonesia’s crude palm oil (CPO) producers should further diversify their products in order to take advantage of surging demand in the global market, a senior government official has said.

Speaking during an international palm oil gathering in Nusa Dua, Bali Thursday, Deputy Agriculture Minister Bayu Krisnamurthi said global demand for CPO-based products continued to increase from year to year.

He said demand had grown between 7 and 11 percent annually over past years, mainly due to increasing demand in terms of product variety of the commodity.

“There are greater varieties of CPO-based products demanded by the market. Cooking oil products are becoming more varied as they use compound raw materials instead of a single one. There are also more than 150 oleochemical derivatives originating from CPO,” Bayu said at the opening of the 6th Indonesian Palm Oil Conference.

The country’s palm oil industry has grown rapidly in the last 30 years, with the size of plantation areas rising to 7.5 million hectares nationwide from merely about 300,000 hectares in the 1980s.

The government has targeted to produce 40 million tons of CPO by 2020 from the current 20.9 million tons, making Indonesia the biggest CPO producer in the world.

In terms of global market, Indonesia and Malaysia are currently the world’s largest producers, controlling 86 percent of global palm oil production.

Of the total of Indonesia’s palm oil production, 40 to 50 percent is processed into biofuel, 20 to 30 percent into cooking oil and the remaining is used to make oleochemical products.

“The value of palm oil exports will reach US$14 billion to $15 billion this year, a small increase from last year,” Deputy Trade Minister Mahindra Siregar said on the sideline of the conference.

He said Indonesia needed to diversify products and expand export markets in order to meet global demand.

Meanwhile, Coordinating Minister for the Economy Hatta Rajasa said in his opening speech that the palm oil industry had played an important role in the national economy due to its large contribution to the country’s exports and in employment.

“In 2009, the export earnings of palm oil totalled about $10 billion, the largest contributor to exports, excluding oil and gas.

“Palm oil has also contributed significantly to the creation of millions of jobs to alleviate poverty, especially in rural areas, with 3.5 million households relying on this sector for a livelihood.”

Indonesia is working on a plan to open industrial clusters especially designed for CPO-related processing firms.

“Starting this year, we are developing downstream palm oil clusters in three provinces: Riau, North Sumatra and East Kalimantan,” Hatta said.

Meanwhile, palm oil advanced for a fourth day to the highest price in more than two years in Kuala Lumpur on Thursday on speculation that global demand for vegetable oils will surpass supply.

The February delivery contract rose as much as 1.6 percent to 3,540 ringgit ($1,123) per metric ton on the Malaysia Derivatives Exchange, the highest price since July 2008. The contract traded at 3,506 ringgit at 5:21 p.m. in Kuala Lumpur.

“Exports from Malaysia point to strong demand for palm oil among major importers such as China, the European Union and India,” said Krishna Reddy, an analyst at Way2Wealth Commodities Ltd. in Mumbai. “Increased demand is coming in at a time when concerns about supplies are mounting.”

Malaysia’s exports rose 19.2 percent to 1.56 million tons in November from the previous month, independent surveyor Societe Generale de Surveillance said this week. Shipments to China and India, the biggest cooking-oil users, jumped 66.3 percent and 72.8 percent respectively, SGS data showed.