Palm oil export policy: It’s time for Indonesia to approach EU

This article has been translated by PwC Indonesia as part of our Plantation News Highlights service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.

Bisnis Indonesia

21 March 2023

By: Indra Gunawan & Ni Luh Anggela

Indonesia is suggested to take the diplomatic route with the European Union (EU) to improve the national palm oil industry after Europe enforced a regulation banning deforestation-linked goods.

The future of palm oil product exports from Indonesia is highlighted once again. This time, the attention comes from the European Union as they have implemented a policy that bans deforestation-linked forestry products. The regulation specifies that forestry products must not come from illegal logging, conservation forests, and protected forests.

Centre for Strategic and International Studies (CSIS) Executive Director Yose Rizal Damuri reckoned that the EU policy must be considered an opportunity to ask for support from Europe to handle the various issues in the domestic palm oil industry, especially concerning smallholders.

“We must admit that there are issues in palm oil practices in Indonesia, but we must also ask for support in other things,” he said to Bisnis on Monday (20/3).

According to him, the EU should help Indonesia to meet the existing provisions. The reason is that the EU must have a solution for the policy that they issued.

“There are things that we can ask for from the European Union. If they prioritise this [non-deforestation policy], they also need to help us handle the various [palm oil issues],” he said.

On the other hand, he also appreciates the Indonesian government’s step not to follow Malaysia in boycotting the EU.

Moreover, the EU’s market for palm oil produced in Indonesia is very small. He is concerned that boycotting the EU will affect Indonesia’s interests in other aspects.

In contrast, Yose reckoned that the EU policy that bans deforestation-linked goods provided Indonesia with an opportunity to improve the quality of the palm oil industry.

“We can also see it as a motivation or an opportunity to improve Indonesia’s palm oil industry by meeting the various standards that have been set as a global parameter,” Yose said.

On Wednesday (15/3), Malaysian oil palm and rubber farmers filed a petition to the EU to protest the regulation that bans deforestation-linked goods that has been implemented by the EU.

In the petition, the farmers are asking the EU to reconsider the regulation on deforestation and acknowledge the loss the regulation incurs on farmers. 

So, how are farmers in Indonesia responding? The Indonesian Oil Palm Farmers Association (Apkasindo) immediately responded to the regulation that bans deforestation-linked goods that has been implemented by the EU.

Head of Apkasindo Central Executive Board Gulat Manurung said that oil palm farmers from 22 Apkasindo member provinces and 164 regional representative councils (DPDs) of regencies/cities have submitted a petition to the central executive board to carry out a simultaneous action.

He noted that Apkasindo has held meetings with delegates from the EU in Indonesia.

“There were four meetings with delegates from the European Union. Once in Riau and three times in Jakarta. They did not produce meaningful results, so we will make a decision immediately. We will immediately coordinate with our board so that our action can be measured and benefit everyone,” he said to Bisnis last week.

He is also considering the invitation from the representative of the National Association of Smallholders Malaysia (NASH) to Indonesian oil palm and rubber farmers to submit a joint petition to the EU to protest the regulation that bans deforestation-linked goods that has been implemented by the EU.

According to him, it has also been discussed with the Head of NASH at the meeting among delegates from Malaysia and Indonesia last February in Jakarta that was facilitated by the Coordinating Ministry for Economic Affairs.

“A representative from the National Association of Smallholders Malaysia [NASH] has stated an invitation to conduct the same action on the same day [on Wednesday],” he stated.

Gulat explained that they had no intention to reject the invitation. He continued that Apkasindo appreciated the invitation. However, he affirmed that, on the same day, the Coordinating Ministry for Economic Affairs invited Apkasindo to discuss the Non-Deforestation Regulation through a limited meeting at the initiative of the EU delegates.

The limited meeting was chaired by the EU Ambassador who represents 27 countries, H.E. Vincent Piket.

“We appreciate the invitation from the Malaysian oil palm farmers, but let us Indonesian oil palm farmers make the decision our own way,” Gulat said.

Increased price

From Palembang, the price of oil palm fresh fruit bunches (FFB) in South Sumatra in the second period of March 2023 showed another upward trend.

South Sumatra Plantation Agency together with the pricing team stated that the price of oil palm FFB in the second period reached Rp2,678 per kilogram (kg), which increased by Rp89 per kg from the previous period.

Middle Expert Agriculture Facilities and Infrastructure Analyst of South Sumatra Plantation Agency, Rudi Arpian, said that the price increase of oil palm FFB was triggered by several factors. “Including the trend of CPO and kernel selling prices, which are stated to increase by the pricing team member companies,” Rudi said on Monday (20/3). 

He explained that the increasing CPO demand approaching Ramadan and Eid was not accompanied by equivalent production, which increased the price of FFB.

“Meanwhile, the FFB production is currently declining. It is also a factor that triggers the price increase,” he continued.

Rudi disclosed that the CPO price is currently around Rp12,535 per kg, while the kernel price is Rp6,038 per kg, and the K-index is 88.8%.

The price of oil palm FFB based on its age in South Sumatra Province in the second period of March 2023 is as follows.

At 3 years old, the price is Rp2,339 per kg, 4 years old is Rp2,398 per kg, 5 years old is Rp2,453 per kg, 6 years old is Rp2,591 per kg, 7 years old is Rp2,545 per kg, 8 years old Rp2,584 per kg, and 9 years old is Rp2,618 per kg.

The price at 21 years old is Rp2,644 per kg, 22 years old is Rp2,614 per kg, 23 years old is Rp2,578 per kg, 24 years old is Rp2,538 per kg, and 25 years old is Rp2,449 per kg.