Supply and Demand Model of Indonesian Palm Oil in The International Market
Tia Sofiani Napitupulu, Djaimi Bakce, Syaiful Hadi
Postgraduate Program Universitas Riau
Kampus Bina Widya Jl. HR. Soebrantas Km. 12.5 Panam. Pekanbaru 28293, Indonesia
Abstract
Indonesia is the leading producer of palm oil in the world. In 2016 Indonesia and Malaysia produced 81% of the worlds palm oil. This study aims to analyze the response of the supply and demand for Indonesian palm oil in the world market. This study used time-series data from 1980-2016. The model built is an econometric model, simultaneous equations. To answer the research objectives, the data were analyzed using the Two Stages Least Square (2SLS) method. The main finding of this study is that in the short term, there are no responsive variables. All variables are responsive in the long run except the lag variable area of Malaysian palm oil in the Malaysian palm oil supply equation and the price of Malaysian palm oil in the Malaysian palm oil supply equation. Variables responsive to Indonesian palm oil supply are the lag area of Indonesian palm oil, the price of urea, and the Rupiah exchange rate against the US Dollar. Variable responsive to Malaysian palm oil supply is the domestic demand for Malaysian palm oil. Variables responsive to Indonesian palm oil demand are the price of Indonesian palm oil and the GDP per capita of Indonesia. On international palm oil demand, responsive variables are the GDP per capita of India, 2-year lag in world palm oil prices, world palm oil prices, and the GDP per capita of Pakistan. The responsive variable affecting world palm oil prices is the increase in world soybean oil prices and world sunflower oil prices.
Keywords: Palm Oil, Simultaneous Equation, Supply, Demand
Topic: Economics, Social and Business