14 December 2021

The price of cooking oil (migor) in the country continues to increase. If at the beginning of 2021 the price of migor was priced in the range of IDR 11 thousand to IDR 15 thousand, now it is in the range of IDR 19 thousand to IDR 23 thousand. This increase has confused some people, especially mothers who use migrants every day. It is said that Indonesia has the largest oil palm plantation land and the largest producer of crude palm oil (CPO) in the world, but why does the price of migrants made from CPO continue to rise.

Data from the Central Statistics Agency (BPS) recorded that Indonesia's CPO production in 2020 was 47 million tons. Of this amount, more CPO was exported for foreign needs, while domestic consumption in 2020 was around 17.35 million tons. When detailed again from the number of domestic CPO consumers, more is used for biodiesel, the rest for other processed needs, including migor.

When viewed from the amount of CPO production and needs in Indonesia, the increase in migor prices should not occur. But please note that CPO is a multi-functional raw material that can be processed for various needs. Apart from migrants, CPO can be processed into chocolate and chocolate jam. Lipstick, margarine and butter jam. Soap, cookies, instant noodles, shampoo, biodiesel and many others. This multi-functionality is what causes the demand for CPO to increase every year.

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Law of the Market

The rise and fall of prices is influenced by supply and demand. In the law of supply, the amount of goods offered will always be directly proportional to the price. That is, if the price of goods rises, the amount of goods offered increases. Conversely, if the price drops, the amount of goods offered will decrease. Whereas in the law of demand that the amount of goods demanded will always be inversely proportional to the price. This means that if the price of goods rises, the amount of goods demanded will decrease. Conversely, if the price of goods falls, the amount of goods demanded will increase.

The current condition is that the demand for CPO at home and abroad is increasing, while the availability of CPO is low. This is due to the El Nino and La Nina climate change, which has disrupted agricultural and plantation production. In Europe, many agricultural products have experienced crop failures, including the production of sunflowers, soybeans which are raw materials for making vegetable oil. Similarly, China, which produces coal for energy, is also experiencing shortages. To cover the shortage, especially in the winter, demand for CPO has increased for energy and vegetable oil. When compared to other energy sources, biodiesel made from CPO is still cheaper. Similarly, palm oil is also cheaper than other vegetable oils.

Indonesia as the world's largest CPO producer after Malaysia is unable to meet the needs of the CPO market in the world. This is because palm oil yields in the last two years have decreased due to climate change. Last year the decline in oil palm yields was due to drought, while this year the decline in yields was due to too much rainfall. Not to mention the lack of fertilizer application a year or two ago due to reduced yields and the price of fresh fruit bunches (FFB) during the drought fell slightly, while the demand for CPO did not increase significantly.

Similarly, Malaysia is supposed to participate in meeting the needs of the CPO market in the world, apart from the climate, there is also the Covid-19 pandemic. Many Indonesian workers who work in the oil palm plantation sector in Malaysia are repatriated to Indonesia. As a result, Malaysia's CPO production is reduced because no one is harvesting.

 

Who Benefits?

If it is said that the increase in migor prices benefits CPO companies, it is not right. Again, the law of supply and demand occurs. If there is little supply while demand increases, prices automatically rise.

Due to the high demand for CPO, the price of FFB has increased significantly. If previously the price of FFB was around IDR 1,000 -  1,200 per kilo, now it has risen to around IDR 3,000. This is of course very profitable for oil palm plantation owners. Even though the harvest is reduced, but supported by the large demand for CPO, causing the price to increase up to 300 percent from the previous price. The increase in CPO prices automatically follows the increase in FFB prices. The profits obtained by plantation owners should be used to carry out good maintenance by applying fertilizer so that the yield for the next harvest is better and more abundant.

To meet the needs of CPO-based goods in the country so that there is no significant increase like the migor that is now happening, short, medium and long term handling is needed. Short-term handling so that the price of migor can be stabilized again, the government can carry out a policy of CPO export levy rates. The CPO tax levy, which is intended to improve the quality and quantity of the implementation of human resource development programs, research and development, community oil palm replanting, facilities and infrastructure, promotion, and biodiesel incentives, also subsidizes the purchase of CPO for migrant needs. So far, the price of migrants follows the price of CPO.

Medium term by limiting the use of palm oil for biodiesel to B100. The realized biodiesel program is B30. In order not to use too much CPO for energy, it needs to be limited to B40. After Indonesia's CPO production has increased, only a gradual increase will be made. Migor and biodiesel are both needed, but migor is absolutely necessary for the needs of the community.

The need for migrants from year to year shows an increasing trend. That means the need for CPO for the processing of migrants in the country will also increase. In order to meet the need for migrants in the country, the government must encourage entrepreneurs to build CPO refining companies to produce consumer goods products, including migrants. One of the companies PT Mahkota Group Tbk will build a refinery in Dumai.

The government's policy of limiting CPO exports is very appropriate. For years, Indonesia, the world's largest CPO producer, has only sold in the form of raw materials. The restriction of CPO exports as said by President Joko Widodo, does not mean that Indonesia is anti-foreign or does not recognize free trade. As a raw material producing country, investors should come to Indonesia. Not raw materials that are exported. Demographic bonus, Indonesia needs employment. With raw materials and labor available, Indonesia is a surge for investment.

In the long term, to meet the demand for CPO, oil palm yields must continue to increase every year. The Central Bureau of Statistics (BPS) noted that oil palm plantations in 2020 reached 8.9 million hectares. Although the government has not yet granted new permits to open new land, with the current area of oil palm plantations, yields can still be maximized to meet domestic and foreign CPO needs.

Maintaining land fertility is very important to increase crop yields. One way to do this is by using organic fertilizers. The remaining FFB processed into CPO can be processed into fertilizer. This is not a small amount. In addition, land that has been unproductive can be managed into oil palm plantations so as not to clear forests into new land. Palm oil is a gift from God Almighty for the welfare of the Indonesian people.

Source : https://analisadaily.com/e-paper/2021-12-13/files/mobile/index.html#12