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FFB prices remain stubbornly low amid policy flip-flop
End to "flush-out" tariff policy does not mean instant increase in domestic CPO and FFB prices, says farmers association.
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Workers load bunches of freshly harvested oil palm fruits onto trucks at a plantation belonging to PT Wanasawit Subur Lestari in Pangkalan Bun, Central Kalimantan, in this 2015 file photograph. (JP/Dhoni Setiawan)
T
he Indonesian Oil Palm Farmers Association (Apkasindo) has expressed hope that the unusually low prices of fresh fruit bunches (FFB) will start to rise on the back of regulatory changes that became effective at the start of this month, but some observers have their doubts.
Apkasindo chairman Gulat Manurung estimated that domestic prices of crude palm oil (CPO) and FFB would gradually increase to respectively Rp 15,000 (US$1.01) per kilogram and Rp 3,000 per kg.
“[We] hope FFB prices for smallholder farmers will increase with the revoked flush-out tariff policy,” he told The Jakarta Post on Tuesday. He stressed that FFB prices would increase over time, however, considering that prices in certain regions, such as Riau Islands province, had reached just Rp 2,134 per kg as of Tuesday.
Indonesia, which usually accounts for about 60 percent of the global palm oil supply, banned exports of CPO and derivative products from April 28 to May 23 in an attempt to tame domestic prices.
The government has since changed course and is now trying to push exports in a bid to lift farm gate prices and boost state revenue. As a part of this move, producers are required to sell a portion of their produce at home under a domestic market obligation (DMO) and join a domestic program for bulk cooking oil sales to ensure sufficient supply for local industries as global prices remain high.
Red tape has reportedly hampered the resumption of shipments since the ban was lifted. In response, the government cut the maximum combined total of export tax and levy from $575 per ton to $488 in the hope that this would reduce stockpiles and thereby encourage refiners to resume buying fruits from farmers.
It then waived the levy on all palm oil products until Aug. 31, leaving only the export tax.
