Stimulus for Acceleration of Exports to Burden Indonesia's CPO

Price movements in CPOTR experienced a downward trend of 5.72% to the level of IDR 13,350 /Kg at the close of last trade, one of the triggers was the increase in Indonesian CPO stocks in June 2022, in this case the government carried out extra efforts to immediately cut domestic supplies and support the price of Fresh Fruit Bunches (FFB) which had fallen due to Indonesia's CPO export ban at the end of last May. In the news circulating, the official from the Ministry of Energy and Mineral Resources Dadan Kusdiana said that Indonesia will increase the content of palm oil-based fuel in its biodiesel to 35% known as B35 which will start on July 20. This is expected to absorb the swelling domestic supply of CPO and help increase the selling price of FFB so that farmers do not lose out.

Meanwhile, on the demand side, there is an increase in COVID-19 cases in China. The Shanghai city government has stopped the lockdown that lasted for two months In early June, but the Shanghai city government continued to impose strict restrictions after more positive cases in local residents, this is a concern for investors, considering China is the largest importer of Indonesian CPO commodities so that can weigh on the movement of CPO. In addition, fears of a global recession have also dragged down prices for CPO commodities, where when a recession occurs, global demand declines so that prices for these commodities are also dragged down while domestic supply becomes abundant.

From the Malaysian side, on Tuesday (12/7) the price of Malaysian palm oil futures was in a downward trend and closed down 0.58%, the decline in CPO prices was triggered by the slowdown in Malaysian CPO exports for June, causing CPO inventories at the end of June to be higher. tall. The Malaysian Palm Oil Board (MPOB) released data for Malaysian palm oil inventories for the end of June of 6.1% at 881.229 ton million tonnes, this figure was higher than the previous month, bringing inventories to their highest level in seven months, while exports slowed. down 13.3% to 1.19 million tonnes due to lack of demand from the EU and India. In addition, Malaysia is reportedly still experiencing a shortage of 120,000 workers to produce CPO, because as many as 80% of these workers are Indonesian workers, but the Indonesian Ambassador to Malaysia (13/7) said that for now Indonesia has stopped sending its citizens to work. in Malaysia due to a breach of the worker recruitment agreement signed in April.

Market View

Indonesian CPO Export Levy Tax

Minister of Finance Sri Mulyani (16/7) gave a speech during the G20 FMCBG in Bali, Sri Mulyani said that she would not impose export levy taxes on crude palm oil (CPO) and its derivatives until 30 August 2022, As stated in Minister of Finance Regulation (PMK) Number 115 of 2022, this export levy tax exemption applies to all products, including fresh fruit bunches, CPO and as well as use cooking oil. This PMK reduced the export levy tax to 0% for all products related to CPO. This is to maintain prices on vegetable oil and also for the welfare of oil palm farmers and it is hoped that prices for cooking oil can be affordable and Indonesia's demand for CPO exports. Furthermore, on September 1, 2022 that tariffs will apply progressively. When the price of CPO is low, the tariff will also be low, while when the price of CPO is high, the tariff will also increase, the aim is to get funding to carry out a price stabilization program, namely biodiesel and in terms of stabilizing cooking oil prices.

WEEKLY ECONOMIC DATA & EVENTS CALENDAR

Date	Data	Actual	Ekspektasi	Sebelumnya
20-July	MY - Balance of Trade JUN	MYR 12.6B	MYR 18.1B	MYR 4.5B
20-July	MY - Exports YoY JUN	30.5%	20.1%	-
20-July	MY - Imports YoY JUN	37.3%	30.4%	-

Source: ICDX Research