Indonesia raises palm oil price cap in domestic supply scheme

Indonesia on Monday said it has revised rules for its palm oil industry, raising the price ceiling for produce sold under the domestic market obligation (DMO) scheme to encourage producers to improve the supply of cheap cooking oil.

Under the DMO scheme, producers must sell some of their output locally at a capped price to gain export permits. However, supply under the DMO scheme has fallen in tandem with weak demand from overseas which has seen a decline in permit requests.

To improve domestic supply, the trade ministry has raised the price cap to 15,700 rupiah ($1.01) a litre from 14,000 rupiah. It also cut its target volume under the DMO scheme to 250,000 metric tons a month from 300,000 tons.

“The price cap adjustment is one of our efforts to boost DMO amid weak export demand,” Ministry of Trade senior official Moga Simatupang told a press conference on Monday.

Palm oil exports fell 4.26% over January-May versus the same period a year prior, showed data from palm oil association GAPKI.

With a decline in the number of export permit requests, the outstanding palm oil export quota was 3.7 million tons as of Aug. 16, barely changed from the 3.95 million tons at the end of July, said trade ministry official Farid Amir.

The world’s biggest palm-oil exporter maintains a palm oil export ratio at four times local supply. Producers who supply oil in smaller, household-friendly sizes or distribute to remote regions are eligible for increased export quotas.

Under the new rules, the ministry no longer recognises crude palm oil or bulk cooking oil as DMO supply, Simatupang also said.

Tags: palm oil, cooking oil, output, demand, Domestic Market Obligation, DMO, export, price, Indonesia