Indonesian palm oil farmers hit by price drop after export centralization reform

Indonesian palm oil farmers are facing significant income losses following the government’s introduction of a new export centralization policy. Under the reform, palm oil exports must be routed through a state-owned trading entity, a move that has disrupted market activity and triggered a sharp decline in farmgate prices.

According to farmers’ associations, prices for fresh fruit bunches in key producing regions have fallen to around Rp 1,000–1,500 per kilogram, compared with about Rp 2,800 previously. The steepest declines have been recorded in West Sulawesi, West Kalimantan, and North Sumatra.

Industry groups say that after the policy announcement, traders and processing companies began reducing or temporarily halting purchases of raw palm fruit. This has led to market uncertainty, panic selling, and a significant slowdown in trading activity across the sector.

Analysts warn that prolonged instability could threaten the broader palm oil industry, as smallholder farmers account for roughly 40% of Indonesia’s total production. Falling incomes are already pushing some farmers to cut fertilizer use, raising concerns over future productivity.

The government says the reform is aimed at improving export governance and preventing revenue losses from undervaluation and tax manipulation. However, farmers’ groups argue that the policy has created market disruption and unfair pressure on producers, calling for either a revision or cancellation of the centralized export system to restore stability.

Tags: Indonesia, palm oil, export