Indonesia updates plans for CPO trade on local exchange; questions remain

5 May 2023 | Regina Koh

Indonesian plans to trade crude palm oil (CPO) on a local futures exchange are progressing, but trade sources talking to Agricensus on Friday highlighted some of the challenges that remain ahead. 

The government is expected to issue a regulation regarding the exchange later this month and is targetting a launch intended in June, Didid Noordiatmoko, the country’s commodity futures regulator (Bappebti), told local news outlets earlier this week.

The regulator, Bappebti, is currently preparing a Regulatory Impact Assessment (RIA) which serves as a prelude to drafting the regulations for the intended bourse, with Didid hopeful that the RIA will be completed quickly.

“I’m optimistic that the regulation will be released at the end of May so that we can start appointing an exchange in early June, and CPO can start getting traded at end June and price discovery can take place in the next two to three months,” Didid said.

Earlier this year Bappebti announced plans to require exporters to trade CPO with overseas buyers on a local exchange before exporting it out of the country, while exporters of refined palm products were also expected to purchase their feedstock via the exchange.

These measures are intended to not only make export data more transparent, but also to create a CPO benchmark price traded in the Indonesian rupiah currency.  

At present most Indonesian exporters conduct physical trades with buyers without an exchange while tenders held by state trading company KPB Nusantara (KPBN) only offer spot physical palm oil volumes and not futures contracts.

For the near term, Bappebti intends to have only CPO spot trading take place on the exchange, with futures contracts to be launched down the road.  

As part of the RIA, Bappebti held discussions with industry stakeholders earlier this week to gather input on the planned policies and mechanisms for CPO exports through an exchange in Indonesia.

More meetings are planned in coming weeks, with Didid adding that trade representatives from buyer countries would also be invited to discuss measures for the planned exchange.

Questions remain

The selection of delivery points for the cargoes continues to be an issue, market participants told Agricensus on Friday, given Indonesia’s size and number of ports.

While Dumai and Belawan are typically seen as the reference for Indonesian exports, ports in other provinces of Indonesia also handle a substantial volume of export flows, and prices can vary across ports.

“The government wants to control the CPO export flow, but logistically it still seems very difficult,” one trader with operations in Indonesia said.

Participants in the industry engagement sessions had also raised requests to include more than just Dumai and Belawan, to which Didid added that the trade policy team (BK Perdag) would conduct an inspection of the ports before any determination would be made.

Another issue that remains would be the actual exchange selected, with the Jakarta Futures Exchange (JFX) and the Indonesia Commodity and Derivatives Exchange (ICDX Group) earlier seen as key contenders.

Another potential contender could be KPBN itself, one source familiar with the matter told Agricensus.

“Some industry associations and market players (at the industry engagement sessions) were suggesting using KPBN as the exchange, as there are some doubts with JFX and ICDX being privately owned,” the source said.

For now, market participants remain in “wait and see” mode, with further developments expected in coming days.