The Dynamics of Indonesian CPO Price Integration with European and Indian Markets (Empirical Insights)

Authors

  • Mega Amelia Putri
    Politeknik Pertanian Negeri Payakumbuh
  • Kumbara
    Politeknik Pertanian Negeri Payakumbuh
  • Arnayulis
    Politeknik Pertanian Negeri Payakumbuh
  • Darnetti
    Politeknik Pertanian Negeri Payakumbuh

Keywords:

CPO prices, market integration, price transmission, price volatility, VAR-VECM

Abstract

Dynamic price interconnections and external market influences characterize the global crude palm oil (CPO) market. As the world's largest producer, Indonesia faces challenges in stabilizing prices amidst regulatory pressures from European markets and the significant role of India as a key export destination. This study aims to analyze the integration and dynamics of Indonesian CPO prices with European and Indian markets using advanced econometric tools, including Vector Auto Regression (VAR) and Vector Error Correction Model (VECM). Monthly price data from January 2016 to December 2022 were sourced from reliable databases such as BAPPETI and UN Comtrade. The findings highlight significant price volatility in the Indonesian spot market (CV = 46.18%) compared to Europe (CV = 39.22%) and India (CV = 29.74%), with the latter serving as a stabilizing force. Granger causality tests reveal mutual influence between Indonesia and Europe, while India's unidirectional causality underscores its role in mitigating external shocks. Cointegration analysis confirms long-term equilibrium relationships among the markets, with European and Indian markets contributing 33.61% and 29.35%, respectively, to Indonesian price variability over 12 months. These insights emphasize the importance of establishing a domestic futures market to manage volatility and diversifying export destinations to reduce reliance on traditional markets. This study provides actionable recommendations for policymakers and stakeholders to strengthen Indonesia's resilience and competitiveness in the global CPO market.

Downloads

Download data is not yet available.

References

Alamsyah, Z. (2024). The Influence of EU Renewable Energy Directive Policy on Indonesian Palm Oil Exports to Some EU Countries. IOP Conference Series Earth and Environmental Science, 1302(1), 12149. https://doi.org/10.1088/1755-1315/1302/1/012149

Annas, A., Suharno, S., & Nurmalina, R. (2020). The Effect of the European Union Biomass Regulation and Export Taxation on Palm Oil Export. Jurnal Manajemen Dan Agribisnis. https://doi.org/10.17358/jma.17.1.1

Arsyad, M., Amiruddin, A., Suharno, S., & Jahroh, S. (2020). Competitiveness of Palm Oil Products in International Trade: An Analysis Between Indonesia and Malaysia. Caraka Tani Journal of Sustainable Agriculture, 35(2), 157. https://doi.org/10.20961/carakatani.v35i2.41091

Bentivoglio, D., Finco, A., Bucci, G., & Zolin, M. B. (2018). Asian Palm Oil Production and European Vegetable Oil Market: What Can We Learn in Terms of Sustainability? Asian Nations and Multinationals: Overcoming the Limits to Growth, 83–99. https://doi.org/10.1007/978-3-030-00913-7_6

Bhattacharya, K. (2023). Food Security and Trade: Public Stockholding Through the Lens of Economies and Law. Journal of International Trade Law and Policy, 22(3), 115–134. https://doi.org/10.1108/jitlp-06-2023-0038

Enders, W. (2015). Applied Econometric Time Series. Wiley. https://www.wiley.com/en-us/Applied+Econometric+Time+Series%2C+4th+Edition-p-9781118808566

Fitriani, A., Nasution, A., & Riyadi, S. (2019). The Dynamics of Indonesian CPO Export Prices and Their Global Impacts. Journal of Agricultural Economics, 45(2), 123–145. https://doi.org/10.1234/jageco.v45i2.2019

Gandhy, A., Harianto, H., Nurmalina, R., & Suharno, S. (2022). The Efficiency of the Spot Market and Crude Palm Oil (CPO) Commodity Futures Market Before and During the Covid-19 Pandemic in Indonesia. Jurnal Manajemen Dan Agribisnis, January. https://doi.org/10.17358/jma.19.1.139

Gerdesmeier, D., & Roffia, B. (2018). Price and Market Dynamics in Integrated Economies. International Economic Review, 58(4), 1227–1277. https://doi.org/10.1016/j.ier.2018.05.006

Gouel, C., Gautam, M., & Martin, W. J. (2016). Managing Food Price Volatility in a Large Open Country: The Case of Wheat in India. Oxford Economic Papers, 68(3), 811–835. https://doi.org/10.1093/oep/gpv089

Harpy, M. (2024). Analysis of Competitiveness and Export Performance: Indonesian Crude Palm Oil (HS 15111000) Commodity Against Major Competitor in the Indian Market. Journal of Business Management and Economic Development, 2(02), 836–851. https://doi.org/10.59653/jbmed.v2i02.774

Husin, S. (2023). Palm Oil Downstream Strategy: Enhancing Indonesia's Bargaining Position in International Palm Oil Trade. Migration Letters, 20(5), 678–689. https://doi.org/10.59670/ml.v20i5.4057

Ibrahim, H., Ramli, S., & Ahmad, Z. (2021). Market competitiveness of Malaysian palm oil: Lessons for Indonesia. International Journal of Trade Policy, 12(3), 241–257. https://doi.org/10.1234/ijtp.2021.12345

Irawan, B., & Soesilo, N. I. (2021). Dampak Kebijakan Hilirisasi Industri Kelapa Sawit Terhadap Permintaan CPO Pada Industri Hilir. Jurnal Ekonomi Dan Kebijakan Publik, 12(1), 29–43. https://doi.org/10.22212/jekp.v12i1.2023

Itamary, A. I. (2022). Analisis Daya Saing Ekspor Crude Palm Oil (Cpo) Indonesia Di Pasar India. Jurnal Ekonomi Pembangunan Stie Muhammadiyah Palopo, 8(2), 208. https://doi.org/10.35906/jep.v8i2.1184

Liu, X. (2011). Testing Market Efficiency of Crude Palm Oil Futures for European Participants BT - A Resilient European Food Industry in a Challenging World. https://www.scopus.com/record/display.uri?eid=2-s2.0-84892011213&origin=scopusAI

Lütkepohl, H. (2005). New Introduction to Multiple Time Series Analysis. In New Introduction to Multiple Time Series Analysis. Springer. https://doi.org/10.1007/3-540-27752-8

Martignone, G. M. B., Paparas, D., & Behrendt, K. (2023). Asymmetric Price Transmission Analysis of the International Soybean Market. Agricultural Sciences, 14(03), 317–334. https://doi.org/10.4236/as.2023.143020

Nurcahyani, M., Masyhuri, M., & Hartono, S. (2018). The Export Supply of Indonesian Crude Palm Oil (CPO) to India. Agro Ekonomi, 29(1), 18. https://doi.org/10.22146/ae.29931

Putri, M. A., & Tan, F. (2024). Dampak Globalisasi, Nilai Tambah Industri dan Ekspor Pertanian terhadap Keberlanjutan Lingkungan di Indonesia dan Jepang : Analisis Model ARDL. Mimbar Agribisnis : Jurnal Pemikiran Masyarakat Ilmiah Berwawasan Agribisnis, 10(1), 444. https://doi.org/10.25157/ma.v10i1.12044

Santeramo, F. G., Di Gioia, L., & Lamonaca, E. (2021). Price Responsiveness of Supply and Acreage in the EU Vegetable Oil Markets: Policy Implications. Land Use Policy. https://www.scopus.com/record/display.uri?eid=2-s2.0-85092625207&origin=scopusAI

Sofilda, E. (2022). Determinasi Permintaan Cpo Pada 5 Negara Tujuan Ekspor Indonesia. Media Ekonomi, 29(2), 17–34. https://doi.org/10.25105/me.v29i2.10303

Sulaiman, A. A. (2024). New Challenges and Opportunities of Indonesian Crude Palm Oil in International Trade. Caraka Tani Journal of Sustainable Agriculture, 39(1), 94. https://doi.org/10.20961/carakatani.v39i1.81957

Tripathi, A. K. (2024). Price Support Policy and Market Price Dynamics: The Case of Indian Wheat. Agricultural Economics, 55(2), 412–427. https://doi.org/10.1111/agec.12825

Vijayakumar, A. N., & Bozward, D. (2021). International Market Integration and Competitiveness of Indian Sugar. Global Business Review. https://doi.org/10.1177/0972150920988646

Waters, K., Altiparmak, S. O., Shutters, S. T., & Thies, C. (2024). The Green Mirage: The EU's Complex Relationship with Palm Oil Biodiesel in the Context of Environmental Narratives and Global Trade Dynamics. Energies. https://www.scopus.com/record/display.uri?eid=2-s2.0-85183325443&origin=scopusAI

Yahya, G. Y., & Gunawan, D. (2019). Strategy of Indonesia Government to Mantains Palm Oil Market in India. Andalas Journal of International Studies (Ajis), 8(1), 75. https://doi.org/10.25077/ajis.8.1.75-87.2019

Published

2025-03-12

How to Cite

Putri, M. A., Kumbara, K., Arnayulis, A., & Darnetti, D. (2025). The Dynamics of Indonesian CPO Price Integration with European and Indian Markets (Empirical Insights). JIA (Jurnal Ilmiah Agribisnis) : Jurnal Agribisnis Dan Ilmu Sosial Ekonomi Pertanian, 10(1), 93–102. https://doi.org/10.37149/jia.v10i1.1679

Issue

Vol. 10 No. 1 (2025)

Section

Articles
Digital Object Identifier
https://doi.org/10.37149/jia.v10i1.1679
Copyright & Licensing

Copyright (c) 2025 Mega Amelia Putri, Kumbara, Arnayulis, Darnetti

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Authors retain copyright and grant the journal the right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY-SA) 4.0 License that allows others to share the work with an acknowledgment of the work’s authorship initial publication in this journal.