Apkasindo asks for oil palm FFB price regulation to be revised

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.

Investor Daily - Apkasindo minta regulasi harga TBS sawit direvisi

22 May 2023

By: Tri Listiyarini & Ridho Syukra

Jakarta - Indonesian Oil Palm Farmers Association (Apkasindo) asked the government to intervene in addressing the continued drop of oil palm fresh fruit bunch (FFB) price, including by immediately revising Agriculture Minister Regulation No. 01 of 2018 and reviewing the FFB pricing which relies on references from the Trade Ministry. Currently, the average price of FFB received by independent smallholders was only Rp1,450-1,800 per kilogram (kg), lower than the cost of production at Rp1,800-2,150 per kg. 

Head of Apkasindo Central Executive Board Gulat ME Manurung said that the decline in global crude palm oil (CPO) prices had only occurred in the last two weeks, but oil palm farmers have experienced the drop in FFB price since early January 2023. This has continued until its peak ahead of Eid 2023, and it is still declining until now. Prior to Ramadan 2023, palm oil mills were still purchasing FFB for Rp1,900-2,200 per kg from independent smallholders and Rp2,450-2,800 per kg from partner smallholders. “However, since the last three weeks, the FFB price of independent smallholders and partner smallholders has both plummeted. The FFB price of independent smallholders is currently Rp1,450-1,800 per kg and partner smallholders Rp1,800-2,400 per kg, while the cost of production for 1 kg of FFB is already at Rp1,800-2,150,” said Gulat. 

Gulat Manurung, as monitored on Apkasindo’s social media channel on Saturday (20/05/2023), explained that oil palm farmers thus far have suffered losses between Rp500-750 per kg of FFB. The losses of the oil palm farmers are compounded by the skyrocketing price of fertiliser to Rp900 thousand per bag (50 kg) from normally Rp350-400 thousand per bag. As a result, for almost a year, many oil palm farmers did not fertilise their plants, and even if they did, they were often scammed with counterfeit fertilisers. What is even more concerning is that, in buying FFB from farmers, palm oil mills are suspected of taking the opportunity amid the uncertainty of CPO prices, which always vary. This can be seen from the decrease in CPO price at the KPBN (PT Kharisma Marketing Bersama Nusantara/Inacom), which then caused the FFB price to fall by Rp300 per kg, while in fact it could be up to Rp600 per kg. This means that the decline in FFB price has already exceeded the decline in CPO price at the KPBN. 

For this reason, Apkasindo strongly expects immediate intervention from the government to provide a solution to the continuing decline in FFB price. This is considering the area of smallholder oil palm plantations is currently around 6.34 million hectares (ha) and 17 million farmers and workers depend on the palm oil industry. One of Apkasindo’s recommendations on this matter is to revise Agriculture Minister Regulation No. 01 of 2018 concerning Guidelines for Determining Purchase Prices for Smallholder Oil Palm FFB. “Revise Agriculture Minister Regulation No. 01 of 2018 immediately, because this is actually the cause of the constantly unstable FFB prices for oil palm farmers from Aceh to Papua,” said Gulat. Another recommendation is to review the FFB pricing by referring to the CPO reference price issued by the Trade Ministry. “Review the smallholder FFB benchmark price by referring to the Trade Ministry’s CPO reference price. We do not want the fate of 17 million oil palm farmers and workers to depend on tenders (at the KPBN),” said Gulat. 

Meanwhile, Chief of Presidential Staff Moeldoko, who is also the Chairperson of the Apkasindo Supervisory Board, admitted that the current condition of oil palm farmers is not good. However, the state would certainly be present for Indonesian oil palm smallholders. “For this reason, as Chief of Presidential Staff and also Chairperson of the Apkasindo Supervisory Board, I will immediately evaluate the trade system for oil palm FFB so that, in the future, the price of FFB will be fairer and more equal for Indonesian oil palm farmers,” said Moeldoko. 

Export via exchange 

On the other hand, the Indonesian Palm Oil Association (IPOA) has yet to conclude whether the policy of requiring 10% palm oil exports to be traded through the CPO Exchange will be burdensome or the contrary because there has been only an initial dissemination. “We do not know yet whether the policy will be burdensome for business players or not, because there has been only an initial dissemination on this, there are no details yet. For example, how much is the transaction fee, and whether both the sellers and buyers must pay the fees, or only either one of them. For now, there is no problem with export either. Prices are currently declining, this is indeed the characteristic of the palm oil commodity, which depends on supply and demand,” said IPOA Head Eddy Martono to Investor Daily on Sunday (21/05/2023).

Previously, Head of the Commodity Futures Trading Authority (CoFTRA) Didid Noordiatmoko said the government would require 10% of CPO export to be traded on the commodity futures exchange or CPO Exchange. Didid conveyed that this was a breakthrough or an innovation by the Trade Ministry in increasing national CPO export performance and state revenue through export taxes. This policy is also in line with the mandate of Law No. 32 of 1997 concerning Commodity Futures Trading as amended by Law No. 10 of 2011.