Indonesia wants crude palm oil exports to be routed via exchange from June

JAKARTA (Reuters) - Indonesia, the world’s biggest palm oil exporter, plans to require crude palm oil exports to go through a futures exchange in order to create the country’s own benchmark price, the head of its commodity futures regulator said on Thursday.

FILE PHOTO: Trucks with palm oil fresh fruit bunches queue for unloading at a factory in West Aceh, Indonesia, May 17, 2022, in this photo taken by Antara Foto. Picture taken May 17, 2022. Antara Foto/Syifa Yulinnas/ via REUTERS

Authorities are developing a trading scheme for crude palm oil which aims to launch in June, said Didid Noordiatmoko, head of the regulator, BAPPEBTI.

“The big strategy is how to require CPO exports to be done through a futures exchange,” he told an industry forum.

Most Indonesian palm oil exporters currently conduct sales directly with buyers without going through an exchange, while auctions held by state trading company KPB Nusantara only offer physical palm oil and not futures contracts.

Refined palm products would be allowed to be exported directly, Didid said, but CPO must be procured via an exchange.

Authorities hoped that price discoveries could be reached within a few months after exporters started trading through an exchange.

Industry groups said they backed policies to help Indonesia become a price setter for palm oil, but warned that thorough preparation was needed.

“The rules must be clear and also there should not be additional costs which could reduce competitiveness of our palm oil,” said Eddy Martono of the Indonesia Palm Oil Association.

Details of the policy were still being discussed, Didid said, including the possibility of providing fiscal incentives.

Sahat Sinaga, chairman of the Indonesia Palm Oil Board, said it was important for Indonesia to build trust for an exchange to be successful, while authorities must also prepare the infrastructure for the physical trade of the vegetable oil.

Reporting by Fransiska Nangoy; Editing by Ed Davies, Kanupriya Kapoor