Indonesia Plantations Update: Indonesian Palm Oil Conference notes
More attendees; Price rebound on volume drop post El Nino: With CPO prices on the rebound, the 12th Indonesian Palm Oil Conference (IPOC) 2016 on 23-25th November 2016 at the Westin Resort Nusa Dua (exhibit 10) with the theme of “Palm Oil Development: Harmonizing Market, Society and the State”, saw around 1,300 delegates, up from the 2015 level of 1,100. Organized by the Indonesian Palm Oil Association (GAPKI), the conference was opened by the chairman of GAPKI, Joko Supriyono, who spoke about the CPO price level which has climbed from its 6-year low at USD630/ton in 2015 to USD660/ton as of October 2016. He pointed out that the price recovery was due to a production drop post El Nino leading to palm oil stocks being at their lowest level of 1.8mn tons in 1H16, down 59% from 4.5mn tons in December 2015. In addition, he stated that Indonesia’s palm oil production in 2016 may only reach 30.9mn tons, -10% y-y. This should drag 2016 exports down by 15% y-y to 22.5mn tons.
5mn cultivating rights certificates to deal with spatial planning: Separately, at the conference, the Minister of Agrarian and Spatial Planning, Sofyan A. Djalil, cited that one of the major problems faced by the palm industry is on agrarian and spatial planning. To address the problem, the minister has issued a policy to accelerate the issue time for cultivating rights certificates (HGUs) to only 90 days. The government will also undertake a pilot project to certify 1,000 plots of smallholders' land, plasma and public land with a total area of 25,000 ha. The government targets to issue 5mn cultivating rights certificates in 2017.
6 government programs to support industry development: At the conference, the Minister of Agriculture, Amran Sulaiman, stated that there are 6 programs defined by the Government in order to further develop the Indonesian palm oil industry and increase its sustainability:
1. Improving the productivity of smallholders’ plantations and increasing funding support for Indonesia Estate Crop Fund for Palm Oil (BPDP) to support smallholders’ replanting, as currently smallholders account for more than 40% of total oil palm plantation areas in Indonesia.
2. Accelerating and encouraging all Indonesian palm oil producers to obtain the Indonesia Sustainable Palm Oil (ISPO) certification for their products in order to be accepted internationally.
3. Increasing utilization of peatlands for oil palm plantations to further intensify palm oil productivity and also to prevent forest fires.
4. Converting the legal status of smallholder plantations from plantation business permits (IUPs) to cultivation rights (HGU) to provide legal certainty and help smallholders obtain bank loans, which should support productivity. The cultivation rights will also enable smallholders to obtain replanting programs from BPDP.
5. Focusing exports on major CPO markets, such as India, China, Pakistan and Bangladesh, but reducing exports to Europe due to the adverse publicity on CPO products from Indonesia.
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