Price Performance Indicators

Market Review

Focus CPOTR:

• Within a week (21/3 – 25/3) ICDX CPO prices rose 1.90%.
• The abolition of the Domestic Market Obligation regulation and the disruption of Malaysian CPO supply.

ICDX CPOTR price rose 1.90% in the past week, the price increase due to a number of global and domestic issues moved CPO prices to reach the range of IDR 22,255/Kg. From the domestic side, the Indonesian government announced to abolish the Domestic Market Obligation (DMO) policy. This regulation requires CPO producers to sell 30% of the total production for resale to the country. The effect of the abolition of this regulation makes exports of CPO positive and prices increase.

In order to change the DMO regulation, the Government changed the policy by increasing the CPO export levy funds and export duties to control domestic oil prices. Export tariff from US$375/ton to US$675/ton. The maximum limit for levies increased from US$1,000/ton to US$1,500/ton. Indonesian CPO exporters are required to pay an export tax on palm oil shipments above the maximum export levy of US$200/ton. According to the Ministry of Trade, the impact of this policy is considered positive for CPO export products. The high price of CPO in the international market has attracted market participants, thus increasing the price of the commodity.

From the foreign side, Malaysian CPO experienced a labor crisis and the addition of the workforce was still in April, this caused domestic production to decline so that supply from Malaysia was hampered, the effect of this decline in production was a positive side for Indonesia because prices Indonesian CPO will become cheaper so that market players are more interested in buying Indonesian CPO

Market View

CPO Prices in the Next Week

From the domestic side, Indonesian cooking oil was scarce when the government set the price of cooking oil to IDR14,000/liter, but after the government revoked the regulation on the highest retail price, there is now a lot of cooking oil on the market at a price of IDR 23,000/liter or higher. Traditionally, demand for cooking oil along with its initial product, namely CPO, may experience an increase in demand from the public due to the effects of the fasting month and Ramadan, which usually encourage consumption of vegetable oil products to increase.

Argentina experienced monthly inflation of 3.9% and annual inflation of 50.7%. To reduce the inflation rate that occurred, Argentina decided to increase the export tax on soybean oil from 31% to 33% until the end of the year, in addition to suppressing inflation, this export increase policy was to meet domestic needs.

The increase in exports of soybean oil made market players look for substitutes. which is cheaper. Substitutes for soybean oil are vegetable oils, namely sunflower seed oil, corn oil and palm oil (CPO). European countries are the largest importers of corn oil and sunflower seed oil. The geopolitical situation in Eastern Europe has reduced the supply of corn oil and sunflower seed oil to other European regions, resulting in higher prices. Due to these geopolitical tensions and uncertain supply, market participants did not want to take risks and opted to buy cheaper CPO.

WEEKLY ECONOMIC DATA & EVENTS CALENDAR

Source: ICDX Research