The Commodity Futures Trading Supervisory Agency (Bappebti) of the Trade Ministry will launch the Crude Palm Oil (CPO) commodity exchange in June.
According to Bappebti head Didid Noordiatmoko, the exchange would determine CPO export prices. The CPO being traded in the stock exchange would have a harmonized system (HS) code of 15.111.000 or remain in its unprocessed crude oil state.
Meanwhile, the CPO for domestic transactions will not be included in the exchange. Later, CPO exports through the stock exchange will still have to pay attention to the domestic market obligation (DMO) policy which is still in force.
“When [a company] is going to export CPO, it has to fulfil the DMO first. After that, it is allowed to enter the stock exchange and get an export permit,” Didid said.
The Indonesian government has yet to determine the institution that will operate the CPO exchange, but so far, two names have emerged: the Jakarta Future Exchange (JFX) and the Indonesia Commodity and Derivatives Exchange (ICDX). The upcoming Trade Ministerial Regulation, set to be issued in early June, will ultimately designate the chosen stock exchange operator.
CPO exchange to monitor DMO compliance
The CPO exchange represented the government’s most recent endeavor to monitor DMO compliance. The Trade Ministry revealed that 30 million of 50 million tons of the average CPO production per year in Indonesia will be allocated for exports. These exports consist of both crude CPO and its sub-products, including oleochemicals to biodiesel materials.
Out of the entire export volume, only approximately 3 million tons or 9.75 percent are included in the HS code 15.111.000, denoting crude oil. These particular exports will be required to be marketed through the CPO exchange.
As of May 1, the government has implemented a monthly DMO for CPO and its processed products amounting to 300,000 tons, which is lower than the previous quota of 450,000 tons per month.
However, the DMO reduction was accompanied by a change in the multiplier ratio for export quotas, shifting from 1:6 to 1:4. Now, producers supplying 1 ton of cooking pil for the domestic market will get an export quota of 4 tons.
This change in the DMO mechanism must be tightly supervised so that CPO producers fulfil their obligations. The Trade Ministry observed that the compliance level with DMO remains below 50 percent, leading to the presumption that producers did not supply CPO to domestic factories and exported their products illegally instead.
CPO exchange to set global trademark
The stock exchange also serves as a platform for monitoring the CPO circulation and price movements. The government has long aspired for the global market to adopt Indonesia’s established benchmark.
All this time, the global CPO trade has relied on the benchmark prices set by the Rotterdam commodity exchange in the Netherlands and the Malaysia Exchange. Thus, as the leading global producers of CPO, it is Indonesia’s rightful role to regulate the pricing.
In 2018, the Trade Ministry introduced the Indonesia Crude Palm Oil Index (ICPOI) managed by PT Index Commoditas Indonesia (IKI) and the Indonesian Oil Palm Producers Association (Gapki). This index is likely to serve as the benchmark employed on the exchange.
From March to mid-May, Bappebti conducted a public test to compile a Regulatory Impact Assessment (RIA), which will serve as the foundation for the rules governing the CPO exchange.
