JAKARTA: Indonesian palm oil fresh fruit bunch (FFB) prices have collapsed at the farmers' level following the announcement of a new plan to channel commodity exports through a central government-run firm, a palm oil farmer association told Reuters on Monday (May 25).
President Prabowo Subianto's scheme, designed to assert more control over Indonesia's lucrative commodity export business, could potentially disrupt supply chains and reduce smallholders' income, the industry has warned.
* "Prices at the farmers' level have collapsed," Gulat Manurung, head of the palm oil farmer association known as Apkasindo, told Reuters in a statement.
* Since the announcement, many collection points have shut down, transportation has been halted and fruits have begun piling up, hitting smallholder farmers the hardest, another palm oil farmer organisation, POPSI, said on Sunday.
* Policy uncertainty has threatened the industry, causing traders and mills to hold back due to unclear export mechanisms, creating potential income losses for the smallholders, POPSI said.
* Supriyadi, a farmer from Mamuju, West Sulawesi, said the price of FFB, which was previously at around 2,800 rupiah (US$0.16) per kilogram, has now plummeted to around 1,000 rupiah (US$0.06), according to a Saturday statement from another farmers union, SPKS.
* "The situation worsened after a number of companies began to withold purchases and temporarily halt sales," said Sabarudin, the head of SPKS, adding that the rapid price drop was a negative market response to the planned single-buyer export trading system.
* SPKS said that many farmers were even considering reducing or even stopping the use of fertiliser due to concerns that palm oil prices will continue to fall and production costs can no longer be covered.
* A unit of Indonesian sovereign wealth fund, called Danantara Sumber Daya Indonesia will become the sole exporter of palm oil as the government seeks tighter control over tax revenues and foreign exchange earnings from commodity sales. - Reuters
