The Indonesian Palm Oil Association (Gapki) believes that the crude palm oil (CPO) price will stay between USD $750 and USD $790 per metric ton in October 2016. This prediction comes on the back of several positive sentiments. CPO demand from China, Europe, India and the USA has increased and is able to offset declining CPO demand from Africa and the Middle East. Fadhil Hasan, Executive Director at Gapki, informed that as a result of strong global CPO demand CPO reserves in Indonesia and Malaysia, the two biggest producers and exporters of the edible oil, are declining.

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Production of crude palm oil (CPO) in Indonesia is expected to decline 5 percent (y/y) to 29.6 million tons from a realization of 31.2 million tons in the preceding year. At the start of the year the Agriculture Ministry of Indonesia targeted CPO output around 31-32 million tons in full-year 2016. However, lower-than-targeted CPO production is the result of a looming strong La Nina weather phenomenon (which brings wetter-than-usual conditions to Southeast Asia) and the strong El Nino earlier this year (bringer droughts to Southeast Asia).

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Stakeholders in the crude palm oil (CPO) industry of Indonesia are pleased seeing the CPO price rising considerably over the past couple of weeks to around 2,500 ringgit (approx. USD $623) per metric ton this week after palm oil futures - traded in Kuala Lumpur - had in fact entered a bear market in July 2016. Meanwhile, the World Bank expects palm oil prices to average USD $650 per ton in 2016, better than USD $623 per ton in 2015 but still a long shot away from USD $851 per ton in 2013 or the peak at USD $1,248 per ton in February 2011.

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The government of Indonesia plans to issue a five-year moratorium on new palm oil plantation concessions through a presidential instruction. For Indonesian President Joko Widodo it is one of the top priorities to safeguard a healthy and sustainable environment, especially after international criticism on Indonesia's weak environmental policies heightened due to the flaring up of devastating forest fires on Kalimantan and Sumatra as well as the spread of toxic haze to other parts of Southeast Asia between June and October 2015.

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An official at Indonesia's Trade Ministry said Southeast Asia's largest economy is to scrap the export tax on crude palm oil (CPO) again. In July 2016 the export tax will be lowered to zero, from USD $3 per ton in the preceding month, due to sliding palm oil prices. The Indonesian government expects palm oil prices to fall in July because after the Ramadan month and subsequent Idul Fitri celebrations are finished demand for the edible is set to decline.

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San Francisco-based environmental organization Rainforest Action Network (RAN) released a report last week that claims Indonesian workers - including children - at North Sumatran palm oil plantations are being exploited. On two palm oil plantations owned by PP London Sumatra Indonesia, a unit of the Indonesian Indofood Group, researchers of RAN found evidence of child labor, unethically low wages, as well as other forms of worker exploitation. The report also links American multinational food and beverage firm PepsiCo Inc's products to the exploitation.

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Palm oil shipments from Indonesia surged 20 percent month-on-month to 2.09 million tons in April 2016 (from 1.74 million tons in the preceding month) according to the latest data from the Indonesian Palm Oil Producers Association (Gapki). Fadhil Hasan, Executive Director of Gapki, said Indonesia's palm oil exports are supported by declining edible oil output in several countries. High rainfall in Argentina and Brazil disturbed local soy bean harvests, while the US soybean harvest is weak as well. Furthermore, rapeseed harvests in China, India and the European Union are weak too, hence boosting demand for CPO.

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The Indonesian Oil Palm Smallholders Association (Apkasindo) requests the government to support the replanting of 2.5 million hectares of oil palm plantations owned by smallholder farmers. Through Minister of Agriculture Regulation No.18/2016 on Guidelines for the Rejuvenation of Oil Palm Plantations, the government is lawfully forced to support smallholder farmers regarding the rejuvenation of oil palm trees. To finance this program, the government takes funds from the Indonesian Oil Palm Estate Fund (BPDP-KS). The BPDP-KS collects funds from the export levies for palm oil products.

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Only five plantation companies listed on the Indonesia Stock Exchange (IDX) managed to post higher revenue in the first quarter of 2016 (compared to the same quarter one year earlier). Of the 14 plantation companies listed on the IDX, four still need to publish their Q1-2016 corporate earnings (Golden Plantation, Sawit Sumbermas Sarana, Multi Agro Gemilang Plantation, and Tunas Baru Lampung). Sampoerna Agro was the company with the highest revenue growth among Indonesia's listed plantation companies in Q1-2016.

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For the first time since October 2014, Indonesia's palm oil exporters will have to pay an export tax on crude palm oil (CPO) shipments as the government's reference CPO price was set at USD $754.10 per ton in May (the level of USD $750 per ton separates taxable from non-taxable shipments). The Indonesian government announced that it will impose a USD $3 per ton tax on CPO exports in May 2016. Palm oil is the key foreign exchange earner for Indonesia in terms of non-mining export products. The country is the world's largest producer and exporter of CPO, followed by Malaysia.

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Palm oil ranks among the most important agricultural commodities of Indonesia as this country is the world’s biggest producer of palm oil. This implies that Indonesia generates important foreign exchange earnings from palm oil exports and is a source of income for millions of workers on the plantations.

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Indonesia is the world’s biggest palm oil grower as well as the world’s biggest exporter of crude palm oil (CPO). Traditionally, palm oil exports are ranked among the top three export products of Indonesia (along with coal and natural gas). As such, palm oil is of crucial importance for the Indonesian economy.

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It have not been great times for palm oil farmers and traders. Malaysia’s benchmark palm oil price is currently hovering near a three-year low of 1,949 ringgit (approx. USD $464.8) per ton amid high inventories, rising production and sluggish global demand.

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Chinese Premier Li Keqiang arrived in Indonesia on Sunday (06/05) for a two-day visit. Part of the visit was a meet up with Indonesian President Joko Widodo (at the Presidential Palace in Bogor) to discuss bilateral trade and investment. Key points on the agenda were the strengthening of trade between both nations and enhanced cooperation on infrastructure development projects in Indonesia, including dams and railways.

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Several negative sentiments are putting pressure on the crude palm oil (CPO) price in the first week of March 2018. These sentiments are expected to continue pushing downward pressure on the CPO price in the remainder of this week. On Monday (05/03) the CPO price on the Malaysia Derivatives Exchange (May 2018 shipments) fell 0.28 percent to 2,467 ringgit per metric ton. Compared to one week earlier, the price has now declined 2.91 percent.

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Through Trade Ministry Regulation No. 82/2017 on the Terms of Use of National Shipping and Insurance Companies for the Export and Import of Certain Goods the Indonesian government requires exporters of crude palm oil (CPO), coal and rice to use ships that are owned by local sea transport companies as well as to use domestic insurance. This regulation will come into effect, gradually, per May 2018.

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The crude palm oil (CPO) price is expected to strengthen in the first quarter of 2018 due to the impact of the La Nina weather phenomenon and rising CPO demand in the traditional big CPO importing countries. This is good news for stakeholders in the palm oil industry as the price has been sliding around 16 percent so far this year (toward the 2,700 Malaysian ringgit per ton level).

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The Indonesian government is eager to boost domestic crude palm oil (CPO) production, but not at the expense of tropical forest (by adding new oil palm plantations). Instead, a new government program aims to replant 20,000 hectares of smallholder palm oil plantations in 2017 under the condition that farmers meet the requirements that are stipulated by Indonesian Sustainable Palm Oil (ISPO) certification.

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The higher crude palm oil (CPO) price will have a positive impact on the corporate earnings of Indonesian CPO producers, including Sampoerna Agro. Benchmark palm oil futures for March 2017 delivery on the Bursa Malaysia Derivatives Exchange were at 3,161 ringgit (approx. USD $706) per ton at the end of last week, near a four and a half year high. However, not all analysts advise investors to purchase shares of Sampoerna Agro, a company that is listed on the Indonesia Stock Exchange.

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Indonesia's Industry Ministry selected the industrial estate in Berau (East Kalimantan) as the center for the downstream palm oil industry in Kalimantan. Furthermore, Panggah Susanto, the Industry Ministry's Director General for Agriculture industry, said the government proposes to select Berau as one of the palm oil centers within the Palm Oil Green Economic Zone (POGEZ) scheme. Berau is chosen to replace Bontang because the former has 3,400 hectares of (clear and clean) industrial land available, while land in Bontang still falls under "protected forest" status.

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