What moves palm oil prices, and the levies on top

An oil palm estate sells a traded commodity, so its revenue moves with prices it doesn’t control. Between the world price and the price a mill pays for fruit in Kalimantan sit several Indonesian policies: an export levy, an export duty, a biodiesel mandate and, since 2026, a state export company.

Nobody can tell you where the price will go. You can understand what moves it, and how much of any move reaches the estate.

The global drivers

Palm oil competes with soybean, sunflower and rapeseed oil. When those are scarce or expensive, buyers switch to palm, and the reverse. A large soybean crop in the Americas or a poor sunflower harvest around the Black Sea feeds through to palm prices.

Crude oil matters because palm oil can be turned into biodiesel. When diesel is expensive, blending palm oil into it looks cheaper, and when crude falls, the subsidy needed to keep biodiesel competitive grows.

Supply moves with the weather, but with a delay. A drought, often linked to El Niño, cuts output months after the dry spell, so prices can react long after the rain returns. Traders also watch stocks in Indonesia and Malaysia, the two largest producers, and Malaysia’s palm oil board publishes monthly figures that move the market.

On the demand side, India and China are the largest importers, so changes in India’s import duties or in Chinese buying show up quickly. Demand inside Indonesia matters more each year, because biodiesel and cooking oil take a growing share of output.

The export levy and the export duty

Two charges apply to exports of crude palm oil (CPO) and its products. Both are tied to a reference price that the trade ministry sets each month from average prices on the Indonesian and Malaysian exchanges and in Rotterdam.

The export levy goes to the Plantation Fund Management Agency (Badan Pengelola Dana Perkebunan, BPDP), which pays for the biodiesel programme and smallholder replanting, among other things. The levy on CPO rose from 7.5% to 10% of the reference price on 17 May 2025, a rise meant to fund biodiesel. Since 1 March 2026, under Minister of Finance Regulation 9 of 2026, it has been 12.5%. Refined products pay lower rates.

The export duty is a tax that goes to the state budget. Under Minister of Finance Regulation 38 of 2024, as amended by Regulation 68 of 2025, it applies only when the reference price is above USD 680 per tonne, and it rises in steps as the reference price rises. In October 2026 the levy and the duty together came to close to 30% of the CPO reference price.

Exporters pass these charges back to their suppliers. That’s why CPO inside Indonesia trades below the world price, and why the gap widens when the levy goes up.

Biodiesel and export controls

Indonesia requires diesel to be blended with palm-based biodiesel. A 40% blend (B40) became mandatory on 1 January 2025. A 50% blend (B50) started on 1 July 2026 under Energy and Mineral Resources Minister Decree 257.K/EK.01/MEM.E/2026, with a transition to 30 September 2026. Each step takes more CPO off the export market. That supports domestic demand, but it also raises the cost of the subsidy that the export levy has to cover.

The state has also restricted exports outright. From 28 April to 23 May 2022, during a cooking oil shortage, it banned palm oil exports, and fruit prices at the farm gate fell sharply while it lasted. Exporters still have to supply a domestic cooking oil programme before they can ship.

In 2026 a new layer arrived. Government Regulation 24 of 2026, in force since 1 June 2026, routes exports of CPO and other palm products through a state export company, PT Danantara Sumberdaya Indonesia. In a transition to 31 December 2026, exporters keep selling to their buyers directly while reporting to it, and from 1 January 2027 it’s due to be the only exporter. After the plan was announced in May 2026, fruit prices fell in several provinces, and the agriculture ministry identified 139 mills buying below their provincial price. How the state exporter will set prices was still settling in October 2026.

How it reaches the farm gate

The price a mill pays for fresh fruit bunches (tandan buah segar, TBS, or FFB) is built from three things: the domestic price of CPO and palm kernels, how much oil and kernel the fruit yields, and the grower’s share. For smallholders in a partnership with a mill, Agriculture Minister Regulation 13 of 2024 sets the method. A provincial team meets at least once every two weeks to propose the price, and the head of the provincial plantation agency sets it on the governor’s behalf. The grower’s share, called the K index, is set monthly. Fruit sold through dealers outside such a partnership is priced by the market, often below the provincial figure.

So every policy above reaches the estate through the domestic CPO price. A higher levy or duty, an export ban or a slower export channel pushes it down. A higher blend mandate adds domestic demand. The article on mills and fruit covers grading and the deductions that come off the price at the weighbridge.

Before you put a price into a model

• Use the domestic CPO price, net of levy and duty, as your base, not the world price.
• Test the plan against lower prices and a higher levy, since the levy changed in both 2025 and 2026.
• Find out how the estate sells its fruit or oil: its own mill, a contract with a mill or the open market.
• Separate rupiah costs from prices that are set in dollars, and read moving money in and out for the currency rules.
• Check the reference price, levy and duty each month, because they change on short notice.

The cost side of the same model is in how an oil palm plantation business works.