Wednesday, November 5, 2008

Global financial crisis hits Indonesian horticultural products

The Jakarta Post , Jakarta | Thu, 11/06/2008 10:29 AM | The Archipelago

A number of provinces are feeling the effects of the U.S.-led global economic slowdown on the marketing and export of their primary local horticultural products such as palm oil and rubber.

Riau, for example, has for the past three weeks been unable to export any crude palm oil (CPO) products because of a lack of orders from foreign importers.

Head of the Riau horticulture agency's product management and marketing division, Ferry HC Putra, said the lack of orders had caused excessive stockpiling of CPO in the province's only export gateway, Dumai.

"The storage facility in Dumai is 80 percent full," Ferry told The Jakarta Post last week.

The warehouse can hold 22,000 metric tons of CPO.

Ferry said that if the CPO was not sold soon, the province would lose revenue of nearly Rp 1 trillion a month, based on the assumption that Riau's annual CPO exports are worth Rp 11.4 trillion.

With about 1.6 million hectares of oil palm plantations, Riau contributes 30 percent of the total national export volume of 4 million metric tons of CPO a year.

Ferry said there were concerns the province's 132 CPO factories in Riau would be forced to close if the situation continued.

"This means Riau could lose investments worth Rp 47 trillion in the sector," he said.

He added that unless the stock could be sold within two months, the price of fresh oil palm fruits, or TBS as they are known locally, would also be affected.

The price drop would affect some 440,000 families who make a living from the sector.

The TBS price has already dropped significantly.

Ferry said the government should issue a regulation forcing the domestic market to absorb the abundant supply of CPO.

One way to do so would be to make mandatory the use of CPO derivatives as a substitute for imported bioethanol in the production of biofuel, Ferry said.

In West Sumatra, the sharp drop in the price of fresh oil palm fruit during the past two weeks has forced farmers to let the fruit rot on their plants.

They said harvesting would not result in any profit because any sales revenue would be the same as the cost of harvesting.

Tapri, a farmer from Taluak Embun, Ujung Gading, in West Pasaman regency, said a kilogram of fresh oil palm fruit was Rp 1,600 three months ago, but was fetching only Rp 350 by the beginning of last month.

West Sumatra Vice Governor Marlis Rahman said his administration would take necessary measures to help reduce any financial losses that oil palm farmers might suffer.

West Sumatra has 280,000 hectares of oil palm plantations, most of which are in West Pasaman, with Ujung Gading as the main production area.

The same cry over a sharp price drop has also been heard in Jambi. Alex Sinaga, a farmer from West Tanjung Jabung regency said that whereas two tons of TBS used to earn him Rp 4 million, it currently brings in only Rp 1.2 million.

"If this situation persists, it will be very hard for us to go on with the plantation," said Alex, one of some 750 families that supply the palm oil company PT Inti Indosawit Subur.

The situation is even worse for farmers who are not partnering with a company, according to the head of the Jambi provincial horticulture agency M Ali Lubis.

Jambi Governor Zulkifli Nurdin has called all oil palm factories in the province to buy the products of non-partner farmers also and to stick to the agreed price.

Meanwhile, in South Sumatra farmers and companies are feeling the pinch from a sharp drop in the price of rubber for the same reason: decreasing export orders due to the global economic crisis.

Chairman of the South Sumatra branch of the Association of Indonesian Rubber Companies (Gapkindo), Alex Kurniawan Eddy, said recently the decrease had been felt since September.

The price of SIR 20 rubber for export has fallen from more than US$2.50 per kilogram to around $2.25 per kilogram. Bokar (raw material for rubber slabs) has fallen to about Rp 12,000 per kilogram, whereas previously it was Rp 21,000.

He said the United States and other crisis-affected European countries had been the main export destinations for the province's rubber, and expressed concern the crisis would affect the export volume to these countries.

"Sales for the last quarter of this year are relatively secure. But for the first quarter of next year, we still have to wait and see," he said.

Suandi, a farmer from Talang Seleman village, Payaraman, Ogan Ilir, said his income had dropped significantly due to the sharp decrease in the prices for his produce.

The price for a kilogram of sap has fallen from Rp 11,800 to Rp 6,500.

"I keep tapping the sap because this is how I support my family," Suandi said.

Payaraman and dozens of surrounding villages form the main rubber production center in South Sumatra, known for their high-quality product.


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