Jakarta. Indonesian palm oil farmers are facing steep income losses after the government introduced a policy requiring palm oil exports to be routed through the newly established state-owned trading entity Danantara Sumberdaya Indonesia (DSI), triggering a sharp decline in fresh fruit bunch prices across major producing regions.

According to data from the Indonesian Oil Palm Farmers Union and the Indonesian Palm Oil Farmers Organizations Association, prices for fresh palm fruit bunches in key production areas such as West Sulawesi, West Kalimantan, and North Sumatra have fallen to around Rp 1,000-Rp 1,500 per kilogram, down from approximately Rp 2,800 ($0.15) per kg previously.

Indonesian Oil Palm Farmers Union chairman Sabarudin said the market reacted negatively to the government’s proposed single-gate export system, prompting exporters and palm oil processors to reduce or temporarily halt purchases from farmers.

“The situation worsened after several companies began suspending purchases and temporarily stopping sales,” Sabarudin said in a statement on Monday.

He urged the government to intervene immediately to stabilize the market, warning that farmers are suffering significant financial losses. According to him, the centralized export policy risks creating a monopsony market structure that could further suppress farmgate prices for fresh fruit bunches.

Sabarudin said the impact could extend beyond declining farmer incomes and threaten the long-term sustainability of smallholder plantations. Many farmers, he added, are now considering reducing or even stopping fertilizer use because of fears that falling prices will no longer cover production costs.

Around 40% of Indonesia’s palm oil supply comes from smallholder plantations, which are highly dependent on stable prices.

If the situation persists, productivity among smallholder plantations could decline and eventually disrupt Indonesia’s overall palm oil supply, he said.

“Farmers are traumatized by what happened in 2015 when fresh fruit bunch prices fell below Rp 1,000 per kilogram. At that time, many farmers switched to other crops because they could no longer survive,” Sabarudin said.

He also argued that the policy contradicts the government’s ambition to expand the B50 biodiesel program, which requires substantial palm oil feedstock. Reduced fertilization and declining smallholder participation could eventually undermine the domestic supply needed for the biodiesel initiative.

Not Too Late to Cancel the Plan
Indonesian Palm Oil Farmers Organizations Association chairman Mansuetus Darto echoed those concerns, saying uncertainty surrounding the policy has caused traders, refiners, exporters, and other market participants to hold back from transactions.

According to Mansuetus, the lack of clarity has fueled market panic, speculation, and weaker trading activity, directly pressuring crude palm oil (CPO) prices.

The government has defended the single-gate export policy as a way to prevent exporters from manipulating export invoices and reducing state revenue from export taxes. However, Mansuetus said the burden of the policy is falling primarily on farmers rather than exporters.

Market data show CPO tender prices dropped from around Rp 15,300 to Rp 12,150 ($0.86 - $0.68) per kg within just a few days, with the effects immediately felt by farmers across producing regions.

“The root problem right now is the lack of regulatory clarity and implementation mechanisms. Businesses do not know how trading, payments, price formation, and risk-sharing arrangements will operate under the new system,” he said.

In such conditions, companies may choose to source raw materials only from affiliated plantations or internal business groups to minimize risk, he added.

Mansuetus warned that the situation could severely affect independent palm oil mills that lack their own refining facilities or export networks.

“Ultimately, this will further pressure crude palm oil prices, and farmers may not even be able to harvest if factories stop operating to avoid losses,” he said.

He argued that the government should instead focus on improving transparency and governance without disrupting market mechanisms. In his view, DSI’s role should be limited to export documentation, monitoring, data transparency, and administrative oversight.

As an alternative, Mansuetus urged the government to cancel the planned export centralization scheme altogether in order to protect millions of palm oil farmers.

“Palm oil is the backbone of the economy for millions of Indonesian families. Export governance policies must be implemented carefully so they do not trigger market panic and undermine the stability of the national palm oil industry,” he said.