A number of stakeholders of the Indonesian palm oil industry is warning of the high risk of layoffs following almost a year of weak world palm oil prices, others remained adamant that the current situation was not yet that bad.
Sumarjono Saragih, who heads the manpower department of the Indonesian Palm Oil Association (IPOA) was quoted by CNBC Indonesia on the weekend as warning that the risk of layoffs was now haunting the industry following the continuing low prices of crude palm oil (CPO) and its derivative products.
“Yes, I do concur, even more so considering the strong pressure from the European Parliament to continue to block the import of our CPO,” the Chairman of the Association of Indonesian Palm Oil Kernel Producers (APCASI) Dikki Akhmar told The Palm Scribe, commenting on Saragih’s warning.
Saragih, who could not be immediately reached for comment, said that on the field, there were fewer plantations harvesting and maintenance works, and some were even scrapped, in centers of palm oil production.
He also said that stocks of Indonesian palm oil were really high while there were also no buyers and that Indonesian CPO often gets rejected in the global market.
Akhmar said that the fund collected from palm oil exports was unfortunately not being used to maintain a stale palm oil market domestically and abroad. The Government instead focused on subsidizing biodiesel, a move that only benefitted large biodiesel producing companies.
“The point is that the Government is not concerned with and aware of the problems of the palm oil industry, does not understand how the industry should be handled and their strategy is dominated by large companies acting on their own interest, no those of the palm oil industry in general, Akhmar told The Palm Scribe.
Meanwhile, Chairman of the Indonesian Palm Oil Council (DMSI) Derom Bangun begged to differ, saying that the situation was not yet as dire as it was said to be. He said whether layoffs would take place depended heavily on whether the companies were well-managed or not.
“Only the small companies, which are not well-managed, or with low productivity, are facing this risk,” Bangun said, replying to a query from The Palm Scribe.
He said that in the short term, the Government must review and adjust the export levy it imposes on exports of CPO and its derivatives.
“It would be better than, and this is only temporary in nature, the Government reduces or even waives the levy on CPO. This will have a direct impact on the prices of Fresh Fruit Bunches (FFBs),” he said.
Indonesia is slapping an export tax that ranges between $30 and $50 per ton on CPO exports and those of its derivative products. The fund collected is then managed by the Palm Oil Plantation Management Agency (BPD PKS) for the development of the palm oil sector.
Bangun also added that the ones suffering the most from the low world prices were the smallholders, especially independent there, or those with plantations that are far from any mills.
“An improvement on the FFB prices will help smallholders, independent farmers,” he said.
Setiyono, who chairs the Association of Scheme Plam Oil Farmers (APK-Pir), said that the general conditions at present were not yet that dire.
“The fact that prices of palm oil have gone down this low not only happened this time and it just so happened that the production of palm oil rose significantly unlike in normal times while other vegetable oil sources, such as soybean, corn, and sunflower are also in the middle of harvests,” he said.