RI is the world’s largest palm oil producer, but the price is regulated from Malaysia – Archyde

KOMPAS.comPalm oil raw or CPO becomes a public concern in the country. This comes after the price of cooking oil has skyrocketed over the past four months.

Edible oil makers argued that the rise in vegetable oil prices was due to an adjustment in global CPO prices, where demand was increasing but supply was insufficient.

As known, Indonesia already producer Palm oil number one in the world since 2006, overtaking the longstanding position Malaysia.

Indonesia’s palm oil production reached 43.5 million tons with an average growth of 3.61 percent per year. This makes CPO the largest source of foreign exchange for Indonesia’s exports.

Also read: Millions of acres of RI’s forests are turning to palm trees, why is cooking oil expensive?

Some of the richest people in Indonesia also come from palm oil entrepreneurs. Aside from local entrepreneurs, ownership of large oil palm plantations in Indonesia is dominated by investors from Singapore and Malaysia.

In fact, large companies that produce cooking oil operate their oil palm plantations on state lands granted by the government under the Grant Rights Program (HGU). Some of the HGUs are even located on forest release sites.

The CPO price is determined from Malaysia

Although palm oil is the world ruler, the ups and downs in palm oil commodity prices are controlled by the exchanges in neighboring countries, namely Bursa Malaysia Derivatives (BMD).

The price of palm oil sold in Indonesia is not only based on BMD but also refers to the commodity exchange in Rotterdam, Netherlands.

Also read: Rows of conglomerates dominating cooking oil in Indonesia

The crop price of oil palm plantations in Indonesia is determined by a CPO futures contract at BMD. The extent of BMD’s influence in setting global palm oil prices is quite reasonable considering Malaysia was previously the world’s largest CPO producer.

BMD’s position as one of the determinants of global palm oil prices has not changed, although Indonesia has recently become the world’s largest CPO producer.

Quoted from the official website, BMD has been trading CPO commodities since October 1980. Palm oil prices are quoted in Malaysian ringgit (RM) and US dollars (USD).

Commodities traded on BMD include: Crude Palm Oil Futures (FCPO), USD Crude Palm Oil Futures (FUPO), USD RBD Palm Olein Futures (FPOL), Crude Palm Kernel Oil Futures (FPKO), Optionen auf Crude Palm Oil Futures (OCPO), and USD RBD Palm Olein Options (OPOL).

Also read: Sri Mulyani said about government money going to cooking oil entrepreneurs

Also, many oil palm plantations in Indonesia are actually owned by Malaysian and Singaporean companies.

The Ministry of Investments/Investment Coordinating Committee (BKPM) found that foreign investment or foreign investment (PMA) in the agricultural sector was still dominated by investments in palm oil plantations in the period 2015 to March 2021.

Realization of FDI in the agricultural sector, dominated by oil palm plantations, reached US$9.5 billion in the period 2015 to March 2021, or contributed about 5.2 percent of the total FDI in Indonesia.

More specifically, foreign investment in the country came from Singapore (53.7 percent) and Malaysia (15.8 percent).

For your information, oil palm itself actually comes from West Africa. This plant belongs to the genus Elaeis and order Arecaceae Originally a plant that grows wild in the lowlands.

Also read: The Irony of Palm Oil: Planted on state lands, sold domestically for a high price

The oil palm was introduced to Malaysia by the British and Indonesia by the Dutch in the mid-18th century, where it was initially cultivated as an ornamental tree.

However, due to its plentiful and cheap oil production compared to other vegetable oils such as soybean, corn and sunflower, its reputation quickly skyrocketed.

The growth of oil palm plantations is relatively fast. New oil palm plantations continue to open each year, although they often face negative environmental problems.

In addition to cooking oil, palm oil is used in a wide variety of food and household products, from cookies, ice cream, chocolate to soaps and cosmetics, and biofuels.

Malaysia and Indonesia account for about 90 percent of global palm oil production.

Also read: KPPU’s suspicions regarding the cooking oil price conspiracy cartel

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