Indonesian Crude Palm Oil Tax No Threat to Exports

20/05/2009 (Flex News), Jakarta - A recent rally in the price of crude palm oil will trigger Indonesia's export tax in June after a seven-month freeze, but the move may not discourage shipments because of tight global supplies, industry officials say.
Indonesia, the world's biggest producer of the commodity, could export 16 million tonnes of palm oil this year, or about 78 percent of output, up from around 14.29 million tonnes estimated in 2008, the Indonesian Palm Oil Board has said.
The export tax, which is partly aimed at safeguarding domestic supplies of the raw material for cooking oil, could further boost palm prices and keep exports attractive.
"Whatever the price is, whatever the tax is, we will keep exporting," said Derom Bangun, the board's vice-chairman. "We will see export tax in June but that should have been taken into account in our export forecast."
The palm oil price has surged 55 percent this year, supported by fears over tightness in global vegetable oils supplies amid falling stocks in second biggest producer Malaysia, and low yields of competitor soyoil in South America.
"I am afraid we are currently in a sellers' market for vegetable oils," an influential industry analyst, Dorab Mistry, told Reuters. "Most consumers are sleeping through this. I don't like the export tax but we have to be realistic. It is coming." Mistry, head of vegetable oil purchasing at Indian conglomerate Godrej International, said early this week the palm price could surpass a key psychological level of 3,000 ringgit ($846) per tonne soon as Asian buyers hunger for more of the vegetable oil at a time of low stocks and weak output. [ID:nKLR431910]
According to a finance ministry decree, Indonesia will charge a minimum tax rate of 1.5 percent on crude palm oil exports if the reference price is at $701-$750 per tonne.
The government uses the average spot palm oil prices in Rotterdam, Europe's vegetable oils market, as its reference price.
The tax rate will be adjusted every month in accordance with palm price movement. A maximum tax rate of 25 percent will be applied if the reference price is higher than $1,250 per tonne. -Reuters-

Sinar Mas Defends Palm Oil Expansion

22/03/2009 (Jakarta Globe) - Sinar Mas Group, one of the country’s top palm oil growers, has denied accusations that its activities are damaging the environment and said it would stick to plans to expand its plantations.

Greenpeace activists have targeted Sinar Mas in a recent campaign for contributing to deforestation, which is blamed as a key source of the nation’s greenhouse gas emissions.

“We should have been arrested if we were ever involved in deforestation,” said Gandi Sulistiyanto, a managing director of Sinar Mas. He said the company only opened up new plantations on degraded land, not rainforest.

Bustar Maitar, a Greenpeace forest campaigner, accused Sinar Mas of destroying forests.

“We are facing the greatest threat to humanity — climate chaos — yet companies like Sinar Mas can continue to destroy forests and peatlands rather than protecting them for future generations,” Maitar said.

As of the end of September, Smart managed 127,124 hectares of oil palm, according to the company. It produced 410,314 metric tons of crude palm oil from January to September last year, against 509,095 metric tons in all of 2007.

The group has plans for a $100 million expansion.

“We are still a growing company,” Sulistiyanto said. Indonesia is “still competing with Malaysia to become the world’s top producer of palm oil, so we must keep planting.”

He said the current financial crisis may slow down the expansion but would not stop the firm from planting in new areas.

According to Greenpeace, Sinar Mas has 200,000 hectares of unplanted concessions in rainforest in Indonesia and plans to acquire an additional 1.1 million hectares, mainly in Papua.

IOI chairman sees palm oil averaging RM2,000

21/03/2009 (Business Times) - IOI Corp Bhd (1961), the world's third largest listed palm oil producer, said the price of crude palm oil (CPO) could rise 20 per cent due to falling domestic stockpiles.

"We see prices trading within a range of RM2,000 to RM2,300, averaging about RM2,000 a tonne. This should be the fair value of palm oil for the time being," said IOI group executive chairman Tan Sri Lee Shin Cheng, without providing a time frame for the forecast.

"Demand for palm oil is sustaining, as can be seen from the drawdown of stocks in Malaysia. Palm oil stock in Malaysia is now at a 16-month low," Lee said in an e-mail when asked to comment on the price outlook for the tropical oil.

Lee's view on palm oil is closely followed by traders and industry analysts.

Malaysia's CPO inventories fell 15 per cent to a 16-month low last month, a bigger-than-expected drop, as production of the vegetable oil declined faster than the drop in exports, industry data showed last week.

Malaysia is the world's second largest palm oil producer, after Indonesia.

The benchmark palm oil futures contract on the Bursa Malaysia derivatives market is currently hovering slightly above RM1,900 a tonne.

CPO prices have gained nearly 13 per cent this year as stocks in Indonesia and Malaysia dropped to an average of four million tonnes from a record five million in December on good Asian demand.

But industry analysts last week predicted that palm oil prices would suffer from selling pressure in the second half of 2009 due to weaker commodity markets, slowing demand and an uptick in output.

Lee is maintaining his relatively bullish view, which he has held since the fourth quarter of last year, even as the global economic outlook has significantly worsened over the past few months.

"The severity of the current global economic crisis has surprised everyone, including the experts," said Lee.

"This crisis has affected almost all commodities adversely as economic activities slumped. However, vegetable oils, being a staple food item, is more resilient," he said. - Reuters

Will palm oil drive deforestation in the Amazon?

23/03/2009 (Mongabay.com) - Already a significant driver of tropical forest conversion across southeast Asia, oil palm expansion could emerge as threat to the Amazon rainforest due to a proposed change in Brazil's forest law, new infrastructure, and the influence of foreign companies in the region, according to researchers writing in the open-access journal Tropical Conservation Science.

William F. Laurance, a senior scientist at the Smithsonian Tropical Research Institute (STRI) in Panama City, Panama, and Rhett A. Butler, founder of environmental science web site Mongabay.com, warn that oil palm expansion in the Brazilian Amazon is likely to occur at the expense of natural forest as a result of a proposed revision to the forest code which requires land owners to retain 80 percent forest on lands in the Amazon. The new law would allow up to 30 percent of this reserve to consist of oil palm.

"Oil palm expansion could be accelerated by, as well as contribute to, the drivers promoting forest loss by buoying the price of land, encouraging infrastructure expansion, and offering a new form of land use in the region," Laurance said. "The entry of Malaysian oil palm operators — announced last year — may hasten development."

Despite a recent fall in the price of palm oil due to declining demand for a wide range of commodities, oil palm expansion in Amazonia will be driven by economics — the high-yielding oilseed could offer higher financial returns than cattle ranching and mechanized soy farms, the dominant agricultural activities in Brazilian Amazon, and may employ larger numbers of people. Further, producers benefit from a "logging subsidy" whereby timber harvested from a tract of land helps offset the cost of establishing a plantation.

Although Brazilian authorities have said the Legal Amazon could sustain a more than 6 million hectares of oil without the need to clear forest land, Butler and Laurance express skepticism that expansion will be limited to degraded and deforested lands.

Should oil palm emerge as a new driver of forest conversion, impacts on biodiversity and climate could be significant. Research in Asia shows that plantations are biological deserts relative even to logged forests, while converting rainforest for oil palm releases at least 60 percent of above ground biomasss.

Although Laurance and Butler express concerns about oil palm expansion, they highlight ways to mitigate the most serious impacts, including strict enforcement of existing environmental laws, requiring landowners adopt eco-friendly cultivation techniques, and offering incentives to steer expansion towards abandoned lands rather than natural forest. They say local greens groups could help by raising public awareness about the potential environmental impacts of large-scale forest conversion for oil palm.

Rainforest Conservation