JOURNAL MONITOR EDITION 40 : PALM OIL PRICES FORECAST: WILL “SKYROCKET” IN 2021?
Journal Pages Number
Journal Document Type
Even in the pandemic, the palm oil industry has succeeded in providing good performance both in terms of production and domestic consumption. The palm oil industry has also succeeded in establishing itself as a regional economic locomotive and become a major source of export foreign exchange which has succeeded in increasing the trade balance surplus. Besides, the trend of palm oil price (CPO CIFF Rotterdam) has also increased from USD 592 per ton in June to USD 847 per ton in November, which is the highest price since 2015.
The high palm oil prices will continue until the second quarter of 2021 and it is even estimated to reach USD 1000 per ton. This is due to low global palm oil stocks as an implication of the not optimalized of growth production due to bad weather and lower productivy because lack of fertilize used, on the other hand, global demand of palm oil has gradually recovered post-Covid along with industrial activities that are returned normal operations and access of export-import ports are reopened.
This level of palm oil price is beneficial for producers, especially smallholder farmers, but also has the potential to become a boomerang that brings losses due to reduced competitiveness in the global market so that the demand for palm oil will decline. The increase in the price of palm oil will reduce the price difference between palm oil and other vegetable oils (soft oils). This condition has the potential will shifting the demand for palm oil to soft oils such as soybean oil, rapeseed oil and sunflower oil.
Therefore, it is necessary to optimize the absorption of palm oil by the domestic processing industry in an strategy to maintain global stock stability at a certain price level that is still profitable for producers and remains an incentive for importer countries.It can be achieved by optimizing the absorption of palm oil by the domestic processing industry. The implementation of the mandatory B30 policy which is continued in 2021 can be one of a solution because it will increase domestic consumptio, so that the global palm oil price that will be formed is USD 750-850 per ton.