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Indonesia Palm Oil Export Overview

Crude palm oil (CPO) is one of Indonesia's most important export commodities. Aside from being an export commodity, it is also an important raw element in the production of cooking oil. To ensure the supply of domestic CPO, the Indonesian government adopted an export tax policy in September 2004. The export tax's goal was to keep the price of cooking oil reasonable. The goal of this study is to discuss the Indonesian government's CPO export tax policy and to examine the impact of the export tax on Indonesia's CPO export competitiveness in comparison to Malaysia, the primary rival. Using monthly data, an export ratio equation between Indonesia and Malaysia is built.

Indonesia is the world's largest palm oil exporter. Its total palm oil exports in 2021 are expected to be 26.9 million metric tonnes. This is likely to fall in 2022 as domestic consumption rises.

The majority of Indonesian palm oil was crude palm oil and refined palm oil, with crude palm oil (CPO) exports expected to reach roughly 25.9 million metric tonnes in 2020. This commodity's export value was approximately 17.3 billion US dollars that year.

India was the primary export destination for Indonesian CPO in 2020, accounting for more than 60% of total CPO exports. In consequence, India was the world's top importer of palm oil that year. India raised import levies on palm oil in 2019, resulting in a drop in demand from this market. However, Indonesian palm oil exports were hampered by increased demand from China, which sought alternate vegetable oil supply as a result of trade restrictions imposed by the United States.

Indonesia's palm oil production volume from 2012 to 2021:

The world's largest producer and exporter of palm oil are Indonesia. In 2021, it produced approximately 46.2 million metric tonnes of this commodity. Due to the extremely rainy weather at the start of the year, production volume in 2022 was predicted to remain flat.

Indonesian oil palm plantations:

Palm oil is one of Indonesia's most important agricultural export commodities, and each year vast swaths of land are removed for palm oil plantations. Large private plantations, smallholders, and state-owned estates are the three types of palm oil estates in Indonesia. The majority of oil palm plantations were concentrated in three provinces: Riau, Kalimantan, and Sumatera. Unsurprisingly, these areas also account for the majority of palm oil output.

The Impacts of Palm Oil Production:

Palm oil production has been under growing global scrutiny and criticism in recent years due to its negative environmental effects. Many plantations in Indonesia use slash-and-burn agriculture to quickly clear the area for new plants. As a result, there is annual air pollution, which has spread to neighboring Singapore and Malaysia. Furthermore, oil palm monoculture has destroyed most of Indonesia's rainforest cover, particularly in Kalimantan and Sumatra.

There are already certain steps in place to ensure sustainable and ecologically friendly production processes. In 2008, the Roundtable on Sustainable Palm Oil (RSPO) established certain criteria that producers must meet to produce Certified Sustainable Palm Oil (CSPO). However, as of June 2019, Indonesia had produced little under eight million metric tonnes of certified sustainable palm oil.

Both palm oil exports and output in Indonesia are expected to dip for the second year in a row in 2021, according to the vice-chairman of the country's palm oil organization (GAPKI) on Tuesday.

The predicted reduction at the world's leading producer is owing to a steep drop in crude palm oil exports as well as output concerns caused by less fertilizer use and poor crop management.

Total palm oil exports are likely to dip 0.34 percent year on year in 2021, according to GAPKI vice-chairman Togar Sitanggang at a virtual conference.

  • Seair Exim
  • 31-Mar-2022

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