The Price of Palm-Cooking Oil in Indonesia: Antecedents and Consequences on the International Price and the Export Volume of CPO

Abstract

Palm-cooking oil is considered to be one of the primary commodity for the Indonesians. In the world of the palm-oil products, Indonesia has currently established its contribution to the production of palm-oil goods globally. However, in the local market, Indonesia has experienced the volatility on the price of one of the most popular palm-products’: the palm-cooking oil. Extant literature suggest various factors affecting the palm-cooking price in Indonesia. The objective of this study is to analyze the influence of the volume of palm-cooking oil production, the Gross Domestic Product (GDP), the consumer price index, the export tax of Crude Palm Oil (CPO), the Indonesian Rupiah (IDR) exchange rate, the volume of CPO production, the price of soy-bean oil, the size of plantations area, and interest rate on to the price of palm-cooking oil in Indonesia. In addition, by using SEM on the 204 samples covering the period during 1996 - 2012, this study expands the analysis by further investigating the effect of these nine factors to determine the international price of CPO and the volume export of CPO. Generally, the main findings indicate that the nine factors as mentioned influence the price of palm-cooking oil, the international price of CPO and the volume export of CPO individually. More specifically, as the substitution product to the soy-bean oil, the palm-cooking oil have underlined the greater elasticity due to the various utilities that can be further produced to fulfil the local and international demands that has increased progressively.

Keywords: Palm-cooking oil, the price of palm-cooking oil, the international price of CPO, the volume export of CPO, SEM.