Small Indonesian palm oil planters already hit by new export ban

SMALL palm oil planters in Indonesia have enjoyed big paycheques in the past year as global vegetable oil prices surged, but these farmers fear they will bear the brunt of the pain from a new export ban coming into effect on Thursday.

From April 28, the world’s top palm oil producer will ban exports of refined, bleached and deodorised (RBD) palm olein, which are made by crushing palm fruit and processing it to remove impurities.

President Joko Widodo announced the ban last Friday to help lower soaring domestic prices, and local farmers said prices of fresh palm fruit bunches have already plunged in Kampar, Riau Province on Sumatra island.

Ahmad Dailami, a 30-year old smallholder, said on Monday he could still sell his palm fruit at 3,500 rupiah (S$0.33) per kilogram, but prices were halved to 1,500 rupiah by Tuesday.

“The impact is very significant for farmers like us,” Dailami said, while harvesting his palm trees.

He is worried that prices could fall even further ahead of the Islamic Eid Al-Fitr holiday which falls in early May.

A NEWSLETTER FOR YOU

Friday, 8.30 am

Asean Business

Business insights centering on South-east Asia's fast-growing economies.

Sign Up

“Maybe the government aims to make cooking oil available domestically by banning exports, but why are we farmers indirectly being oppressed?“

Indonesia’s chief economic minister Airlangga Hartarto said the ban would stay in place until prices of bulk cooking oil fall to 14,000 rupiah per litre across the country.

At markets in Jakarta, prices were around 19,000-20,000 rupiah per litre on Wednesday, a traditional market sellers group said.

Similar drops in palm fruit prices have also been seen in other parts of the country, said Mansuetus Darto, secretary general of Indonesia’s Oil Palm Farmers Union.

He said special attention was needed for farmers with holdings smaller than 25 hectares (0.25 square km), who number around 80,000.

Smallholders account for nearly 7 million hectares of Indonesia’s total 16.4 million hectares of palm plantations.

High global palm oil prices have allowed farmers to afford increasingly expensive fertiliser and, in some cases, left them enough to buy new SUVs, said Suher, a 57-year-old oil farmer in Kampar.

Now, Suher is worried not only by the prospect of falling prices, but fears that palm oil companies will stop buying from independent farmers.

“What is more worrying is if palm oil mills stop taking oil palm fruit from farmers and just process their own palm fruit,” he said, noting palm is his only source of income.

Moreover, he added, fertiliser prices are now double what he normally paid.

Global prices of urea, the most commonly-used fertilizer, are up over 100 per cent from a year ago and have risen 30 per cent so far this year after Russia’s invasion of Ukraine this year severed shipments from the Black Sea.

Dailami said if fruit prices continue to drop, he would cut his fertiliser use from the typical three or four times a month to once or twice.

A drop in fertiliser usage could affect the future output of his plantation.

Chief economic minister Airlangga said in a statement late on Tuesday that he hoped palm companies will continue to buy farmers’ fruit at a fair price.

The Agriculture Ministry has sent out notes to provincial governments to strengthen monitoring to ensure palm fruit from farmers was bought in accordance to pricing rules. The regional government can recommend permit removals for those violating the rules, Dedi Junaedi, a senior agriculture ministry said.

Indonesia typically exports about US$2.5 billion to US$3 billion of palm oil products per month. REUTERS