Indonesia’s plan to tighten CPO exports may advantage Malaysia?
21/05/2026 (IDN Financials), Jakarta - Indonesia’s plan to centralise palm oil exports through a state agency has raised concerns among global industry players over potential supply disruptions and increased volatility in global vegetable oil prices.
As reported by Reuters, President Prabowo Subianto previously announced that the government would require exports of palm oil, coal, and ferronickel to be conducted through a special state body. The policy forms part of a broader strategy to tighten control over natural resources while boosting state revenues.
Indonesia currently accounts for more than half of global palm oil exports. Past export restrictions imposed by Indonesia have consistently driven up global palm oil prices, including soybean oil and sunflower oil as substitute products.
The global palm oil market is already under pressure from rising biodiesel demand and the impact of dry El Niño weather conditions on production. Following the Indonesian government’s announcement, Malaysian palm oil futures briefly jumped around 2% before easing slightly.
“The palm oil market is trying to adjust to rising energy prices triggered by the conflict in the Middle East,” said Aashish Acharya, Vice President of Patanjali Foods. “Indonesia’s move is likely to add another layer of uncertainty and increase volatility in the market.”
Industry players believe export centralisation could alter Indonesia’s palm oil trading structure by concentrating pricing power in state-affiliated entities.
“A centralised export mechanism could weaken the current market-based trading ecosystem by concentrating pricing power within entities linked to the state,” said former head of the Malaysian Palm Oil Association, M.R. Chandran.
“This could increase market uncertainty, reduce transparency, and introduce greater political influence into commercial trade flows.”
According to Chandran, such conditions could instead benefit Malaysia as the world’s second-largest palm oil producer, as global buyers may seek supplies from countries with more stable policies.
Chairman of the Indonesian Palm Oil Association (GAPKI), Eddy Martono, also warned that long-standing trade relationships with international buyers could be disrupted if export centralisation is implemented without careful management.
Similar concerns have been raised by palm oil farmer groups. Mansuetus Darto, a representative of the Palm Oil Farmers Union (POPSI), said millions of smallholders risk losing bargaining power if market access is controlled through a single channel.
“When the number of buyers shrinks and market access is controlled by one party, farmers’ bargaining position automatically declines,” Darto said. “In such a situation, farmers will increasingly become price takers.”
Amid the plan, the government is also continuing to tighten oversight of illegal palm oil plantations and has handed over 4.12 million hectares of land to state-owned company Agrinas Palma Nusantara. (DH/LM)