Crude palm oil (CPO) prices in the international market are trending upward, pushing domestic prices higher amid the looming implementation of the mandatory biodiesel policy.
According to Eddy Martono, Chairman of the Indonesian Palm Oil Association (Gapki), the modest price increase has been driven by rising demand from India.
“Currently, local CPO prices stand at around IDR 14,500 per kilogram. The increase is triggered by India’s higher consumption as its festive season begins,” he told SUAR in a phone interview from Jakarta on Wednesday (Aug 13, 2025).
According to Reuters, crude palm oil futures extended their rally to hit the highest level in four consecutive sessions. Market optimism toward stronger August export data has been a key driver.
Benchmark CPO futures for October 2025 delivery at the Bursa Derivatives Exchange rose RM 57 per ton, or 1.29%, to RM 4,459 per metric ton in Wednesday’s trading. Meanwhile, global vegetable oil markets also saw gains, with palm oil contracts rising 1.33%.
Professor Dwi Andreas Santosa from the Faculty of Agriculture at IPB University said that international trade dynamics strongly influence CPO pricing.
“In recent months, global CPO prices have gradually recovered after a steep decline. This trend is closely tied to other vegetable oils, especially soybean oil,” he explained to SUAR.
He added that if global soybean production falls, CPO prices will surge; conversely, if soybean output is strong, CPO prices will weaken. This volatility is difficult to predict as it depends heavily on climate conditions in key soybean-producing regions such as Latin America and North America.
Market Diversification
As the world’s largest CPO exporter, Indonesia plays a pivotal role in the global market. With an annual production capacity of 52 million tons, Indonesia far surpasses Malaysia’s 19 million tons.
“Importing countries like China, India, the European Union, Pakistan, the United States, and Bangladesh are highly dependent on our palm oil,” said Eddy.
Gapki data shows that Indonesia’s CPO exports contributed USD 13.64 billion up to May 2025. However, CPO production in May dropped 7.01% to 4.165 million tons, down from 4.479 million tons the previous month.
Eddy stressed the importance of market diversification.
“We cannot rely solely on traditional markets. We must explore new opportunities in Africa, the Middle East, Central Asia, and even expand exports to Russia,” he said.
Competition with Malaysia presents another challenge, particularly in global markets. Professor Dwi Andreas noted that tariff policies play a decisive role.
“Currently, Indonesia is negotiating the 19% tariff imposed by the United States. If Malaysia faces a higher tariff, we gain an advantage in the U.S. market. However, in the EU, deforestation issues pose a significant challenge,” he explained.
However, he added that Indonesia’s CPO exports to the EU remain relatively modest, with Spain and the Netherlands as the main importers.
B50 Policy Sparks Industry Concerns
The government’s plan to mandate the use of biodiesel with 50% palm oil content (B50) by early 2026 has triggered concerns among palm oil producers. Industry players fear that stagnant CPO production and limited biodiesel incentives could squeeze export volumes.
Eddy Martono, Chairman of GAPKI, expressed skepticism:
“GAPKI is pessimistic about the B50 target. Stagnant CPO production will cut export volumes, while biodiesel incentives heavily depend on export levies,” he said.
Deputy Minister of Energy and Mineral Resources (ESDM) Yuliot Tanjung confirmed that the government remains firm on implementing B50 in 2026. While evaluating the ongoing B40 program, the ministry is preparing a parallel roadmap to ensure a smooth transition.
Agriculture expert Dwi Andreas Santosa raised additional concerns, pointing out the disproportionate allocation of the Palm Oil Plantation Fund Management Agency (BPDPKS).
“In the 2020s, more than 80% of BPDPKS funds were absorbed by biodiesel subsidies, leaving little for smallholder replanting,” he said.
The subsidy gap is widening: biodiesel subsidies this year reached IDR 51 trillion, while export levy collections averaged only IDR 30–35 trillion. If B50 is enforced, the gap could force the government to raise export levies, risking competitiveness abroad and leaving fewer resources for farmer welfare.
With palm oil contributing 74% of Indonesia’s agricultural trade surplus, which has been declining since 2022, experts warn that poorly calibrated policies could jeopardize both export stability and smallholder prosperity.
“There needs to be a balanced approach between domestic energy needs, export resilience, and farmer welfare,” Dwi concluded.
