POGO measures the relative costs of Crude Palm Oil versus diesel, and it appears that the Indonesian government is not shy about continuing to promote its blending plans for Biodiesel from the current 35% to 40% by January 1 and then possibly 50% at some stage. The cost of this will have to be borne by the state as the POGO premium over Diesel is already $325/mt. An export levy that generates tax revenue to offset this premium does exist, but the $325/mt POGO poses a significant fiscal challenge. At the current price, the export tax levy is at least $175/mt and generates about $5 billion to fund the Biodiesel blend for 2024, but it appears that the Indonesian government is trying to push prices much higher so that the export tax levy increases to its maximum allowable level of $375/mt under its export tax levy policy that will be triggered above $1000/mt export pricing for CPO. This essentially will upset many palm customers in India and China who have come to rely upon Palm as the cheapest vegetable oil. This means that customers will have to substitute palm for soft oils, especially Soyoil - BOPO is a good measure of this phenomenon. Such substitution is already happening in India.
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