Crude palm oil (CPO) prices in the international market are showing an upward trend. This has helped CPO prices in the domestic market to rise amid the shadow of the soon-to-be-implemented mandatory biodiesel policy.
This slight increase, according to Indonesian Palm Oil Association (Gapki) Chairman Eddy Martono, was driven by increased demand from India.
"Currently, local CPO prices are at around Rp 14,500 per kilogram. This increase was triggered by India's increasing demand as the festival season began there," he told SUAR by telephone in Jakarta, Wednesday (13/8/2025).
According to Reuters, crude palm oil (CPO) contract prices surged again and recorded the highest level in four consecutive sessions.
The rise was triggered by market optimism over August export data which is projected to be stronger.
The price of the benchmark palm oil futures contract for October 2025 delivery on the Bursa Derivatives Exchange rose RM 57 per ton or 1.29% to RM 4,459 per metric ton on Wednesday (Aug 13).
Meanwhile, an increase in vegetable oil prices was also seen in the global market with palm oil contract prices strengthening 1.33%.
According to Professor of the Faculty of Agriculture at the Bogor Agricultural University (IPB), Dwi Andreas Santosa, the dynamics of international trade greatly affect CPO prices.
"In the last few months, world CPO prices have slowly increased, after previously falling. This trend is influenced by the price movements of othervegetable oils, especially soybeans," he told SUAR.
He added that if global soybean production declines, CPO prices will surge. Conversely, if soybean production is good, CPO prices will fall. This price dynamic is very difficult to predict because it depends on climatic conditions in the largest soybean producing regions, such as Latin America and North America.
Market diversification
As the world's largest CPO exporter, Indonesia plays a crucial role in the global market. Indonesia, known as the world's largest CPO producer, remains optimistic that its products will always be in demand.
The largest country in ASEAN can produce 52 million tons of CPO per year, followed by Malaysia with CPO production of around 19 million tons.
"Importing countries such as China, India, the European Union, Pakistan, the United States, and Bangladesh really need our palm oil," Eddy said.
Based on Gapki data, CPO export contribution reached USD 13.64 billion until May 2025, CPO production in May 2025 fell 7.01% to 4,165 thousand tons from 4,479 thousand tons in the previous month.
However, Eddy also emphasized the importance of market diversification.
"We cannot continue to depend on traditional markets. We must explore new markets in African countries, the Middle East, Central Asia, and there is also potential to increase exports to Russia," he said.
Another challenge comes from competition with Malaysia, especially in the global market. Dwi Andreas Santosa continued that this competition is highly dependent on tariff policy.
"Currently, Indonesia is still negotiating the 19% tariff imposed by the United States. If Malaysia is subjected to a higher tariff, we will have an advantage in the American market. However, in other markets such as the European Union, the issue of deforestation is a challenge," he explained.
However, he explained that Indonesia's CPO exports to the European Union are not that big, with Spain and the Netherlands as the main importers in the EU.
The shadow of B50
Meanwhile, the government's plan to roll out a mandatory biodiesel policy, especially the implementation of B50 in early 2026, has also raised concerns among palm oil entrepreneurs.
According to Eddy, this is due to tight global supply and limited incentives for biodiesel.
"Gapki is pessimistic about the B50 target because stagnant CPO production will reduce export volumes, while biodiesel incentive funds are highly dependent on export levies (PE)," Eddy said.
According to Kumparan, Deputy Minister of Energy and Mineral Resources (ESDM), Yuliot Tanjung, emphasized that the government continues to target the implementation of the 50% biodiesel program (B50) in early 2026.
According to Yuliot, the government is currently evaluating the implementation of the B40 program that has been running since early 2025. This evaluation is being conducted in parallel in preparation for the transition to B50.
"For B50, we are evaluating the implementation of B40 this year and we also hope that the implementation of B50 next year can be accessed immediately," he said at the Ministry of Energy and Mineral Resources office (8/8/2025).
Dwi Andreas expressed similar concerns. He said the funds managed by the Palm Oil Plantation Fund Management Agency (BPDPKS) were mostly siphoned off for biodiesel subsidies.
"In the 2020s, more than 80% of BPDPKS funds were sucked up for this program. In fact, these funds should also be allocated for thereplanting of smallholder plantations," he said.
He also observed that the amount of subsidy that the government has to bear is not in line with the funds collected from PE, which could result in a reduced budget for the rejuvenation of people's plantations.
"This year's biodiesel subsidy reached Rp 51 trillion. In fact, the funds collected from export levies are only around Rp 30 trillion-Rp 35 trillion on average. If the B50 program is implemented, the required subsidy funds will be even larger, which will likely be resolved by increasing the export levy," he said.
According to him, the palm oil sector plays a vital role in Indonesia's trade balance because the agricultural commodity trade surplus is 74% contributed by CPO. Meanwhile, he explained that the CPO trade surplus has continued to decline since 2022.
"Therefore, there needs to be a wise policy to balance between meeting domestic energy needs and maintaining export stability and the welfare of farmers," he said.
