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Indonesia, Malaysia & Colombia Are Ready Against European Union Palm Oil Discrimination, Analysts Explain

The crude palm oil producers, Indonesia, Malaysia and Colombia, agreed to fight against palm oil discrimination by the European Union on Thursday (2/28/2019).

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JAKARTA – Crude palm oil producers, Indonesia, Malaysia and Colombia, have agreed to fight against palm oil discrimination by the European Union on Thursday (2/28/2019).

The President Director of PT Garuda Berjangka Ibrahim assessed that the efforts of the producers would have a long-term impact on the price of the commodity. Because, the European Union is one of the largest economies in the world. This means that if the CPO market is maintained there, it’s likely to hoist the price forward.

“Definitely [impacted]. Europe is the direction of the world economy. Even from the currency, the Euro is higher [in value compared to other currencies], “he said to Business recently.

Even so, he sees the EU’s efforts to ban CPO are very reasonable. Because they do not want their palm oil, such as soybean oil, pig oil, and flower oil to be disrupted by oil palm. “The oils are from Europe. They know that CPO will defeat the vegetable oils because the price is the cheapest, “he said.

Mentioned about the fall of oil prices in the last 5 years, Ibrahim did not deny that there was also a role for black European campaigns in it. As a result of that, speculators will run away from the market.

“The price is formed from speculators. If they run away from the [palm] market, the price will not be formed. Deals and requests finally stayed in place. So it’s natural that CPO falls, bro. Very bad, “he said.

He added, the high price of CPO in 2017 could not be separated from the efforts of the Indonesian and Malaysian governments working together to make avtur alternative fuels from palm oil. However, after being tested it turns out that the palm cannot be used as avtur.

“Because 60% of Malaysian and Indonesian palm oil production will go into avtur [if the plan is explored. That is what raises high prices. The reality is not [appropriate], “he said.

Based on Bloomberg data, in the last 5 years, palm oil prices had reached the highest level of 2,785 ringgit per ton in 2017. But then plunged to 23.84% at the level of 2,121 ringgit per ton, on Thursday (2/28/2019).

Analyst at Asia Trade Point Futures Deddy Yusuf Siregar said that this effort would not have a significant impact on current CPO prices. “Because as long as CPO supply remains high [prices will be depressed]. Reflected from the high production of Malaysian and Indonesian CPO in January [2019], “he told Bisnis on Thursday (2/28/2019).

Quoting Bloomberg, although Indonesian palm oil production fell 7.7% in January 2019 compared to December 2018. However, it is still higher than production in January 2018.

So even with Malaysia. The country’s palm oil production was down 3.9% on a monthly basis, but still above the production level in the same month last year.

Deddy said, in the current situation, market participants pay more attention to the abundant supply of palm oil compared to the efforts of oil palm producers against the European Union. “I think so,” he said.

According to Deddy, efforts made in the form of developing biodiesel to increase CPO demand are enough to boost prices back to their highest level. Because then the global CPO supply will be eroded.

“Despite the long-term impact, this method might support the CPO rate,” he said.

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