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NEWS UPDATES Asean Affairs   13  December 2010

Indonesia to have own palm oil reference price

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Indonesia is to have its own Crude Palm Oil (CPO) price quoted at the Indonesian Commodity and Derivatives Exchange (BKDI) that may help the country manage its export duties and boost production, a Trade Ministry official has said.

"The necessary preparations to use the price at the exchange as the official CPO reference price have been completed. Now we are only waiting for the issuance of a government regulation to support this policy," Deputy Trade Minister Mahendra Siregar has said.

Making the price quoted by the BKDI as the reference price for Indonesian CPO is part of a government policy to restructure the mechanism for determining duties on export goods, he said.

Mahendra also said having a local reference maintains the prices of commodities, which in turn encourages farmers to plant more.

"By using the local reference price for local futures trading, it is expected that there will be an increase in the trade volume of local CPO physical transactions that makes our domestic futures trading deemed important," Mahendra said.

However, he said Indonesia would still use the Rotterdam CPO reference price pending the establishment of a local futures bourse next year.

Indonesia has benchmarked the international price of its CPO to the physical market in Rotterdam, the Netherlands, with its export price reference pegged to US dollar. Indonesia, which is the world's largest CPO producer, hopes the BKDI will replace Rotterdam as the reference for world CPO prices.

The BKDI will use two ports - Belawan in North Sumatera and Dumai in Riau - as the central delivery points for export markets. CPO prices at these delivery points will represent physical prices of Indonesian CPO.

In addition, Indonesia will use the rupiah as the reference currency in the CPO export reference prices, as proposed by the Indonesian Association of Palm Oil Traders (GAPKI).

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