FACTORS RELATED TO CRUDE EXPORT PALM OIL (CPO)

Fauzul Azhimah *), Sri Fajar Ayu, SP,MM,DBA**) dan Dr. Ir. Surya Abadi
Sembiring, M.Si**)

*) Alumni Master Program Agribusiness Study Program Faculty of Agriculture

University of North Sumatra Department of Master of Agribusiness Faculty of
Agriculture Universitas North Sumatera Jl.Prof. A. Sofyan no. 3 Medan.
Hp. +6282168123841, E-mail: fauzulazhimah@ymail.com
**) Lecturer of Faculty of Agricultural Faculty Masters Program University of
Northern Sumatra
ABSTRACT

This study aims to analyze the balance of long-term and short-term, CPO
export prices, world soybean oil prices, domestic CPO production, inflation, Rupiah
exchange rate against US Dollar, export tax applicable to the export volume of CPO.
The analytical method used in Engle Granger cointegration analysis and completed
with E-Views application. The research data is secondary data amounting to 518
weekly data collected from year 2006 until 2015. The data is analyzed by Engel
Granger cointegration method. The result of the analysis shows that there is a positive
correlation between CPO export price, soybean oil and domestic CPO. While the
inflation, exchange rate, and export tax variables show a negative correlation to CPO
exports. In this long-term relationship only the variables of soybean oil and inflation
are not directly related because the probability value is above 0.05 (5%). In short-term
correlation, there is a positive correlation to CPO export price variables, soybean oil
price and CPO domestic production. While the variables of inflation, exchange rate
and export tax show negative correlation to CPO exports. In this short-term
relationship only inflation is directly related because the probability value is below
0.05 (5%).

BACKGROUND

International trade is a cross-border trade activity by agreeing commodity price

fixing, amount, and transaction time. A country that has an abundance of commodities
offers at a certain price level and amount to a country in need of that commodity. This
condition can be seen in the trading of crude palm oil commodity ie Crude Palm Oil
(CPO) (Saylor.org, 2015). CPO trade is beneficial to Indonesia as income of
government or foreign exchange where 2014 foreign exchange from CPO export
reaches USD19,56 billion (Lestarini, 2016). Indonesia exports CPO exports due to the
production of oil palm commodity plantations with the main products of Crude Palm
Oil (CPO) in large quantities which can be shown in the following graph

250000.00
200000.00
150000.00
100000.00
50000.00
0.00 Produksi
Domestik
CPO

Source: BPS 2006 - 2015

Figure 1. The Development of Indonesian CPO Production
Production growth shown in Figure 1. CPO production shown relatively
increased during 2013 to 2015. This increase in production will encourage CPO
producers to prefer CPO export to get bigger profit (Muslih et al, 2013). However,
what is happening is the development of Indonesian CPO exports did not show a
significant increase in the timeframe. The development of CPO exports can be seen in
the following figure
150000.00
100000.00
50000.00
Volume
0.00 Ekspor
CPO

Source: BPS 2006 - 2015

Figure 2. Development of CPO Exports
The development of CPO exports in Figure 2 shows a relatively constant
condition every year. This shows the export and production of CPO does not affect
between one and the other. The relatively constant development of CPO exports and
increased production indicate pressure from the government to reduce the number of
Indonesian CPO exports for the development of downstream CPO (PTPN V, 2015).
The government encourages the downstream CPO with the support of export duty or
export tax. (MoF, 2015). The development of CPO export and export tax can be seen
in the following figure
120000.00 400.00
100000.00
300.00 Ekspor
80000.00
60000.00 200.00 CPO
40000.00
100.00
20000.00
0.00 0.00
Pajak
Ekspor
CPO

Sumber : BPS 2006 – 2015 dan Kemenkeu 2005 – 2015

Figure 3. The Development of CPO Export and Export Tax
The development of CPO export and export tax does not show any significant
relation. This is indicated by an estimate of exporters or producers of CPOs choosing a
larger profit by exporting CPO. This greater advantage is derived from the difference
in exchange rates. Exchange rates often fluctuate in value due to domestic and foreign
monetary policy (Williamson, 2014). Here's the development of USD exchange rate
against IDR with CPO export

150000.00 16000.00
100000.00 14000.00
ekspor
Ton

IDR
12000.00
50000.00 10000.00
0.00 8000.00

Kurs

Source: BI 2006 - 2015 and BPS 2006 - 2015

Figure 4. Comparison of Growth Rate With Export CPO
The development of exchange rate and CPO exports showed different
developments. CPO exports are relatively constant while exchange rates fluctuate with
respect to the inflation rate (Mankiw, 2013). The weakening of the exchange rate that
occurred during the last four years indicated deflation in Indonesia. It can be seen in
the following figure:
110000.00

Satuan Inflasi
90000.00 ekspor
0.00
70000.00 CPO
Ton

50000.00 -5.00
30000.00 Inflasi
10000.00 -10.00

Source: BPS 2006 - 2015

Figure 5. Inflation and Its Relation to CPO Exports
The development of inflation that occurred shows the relation with CPO
exports. CPO exports tend to decline in the event of inflation. Based on these
conditions, it is indicated that CPO exports tend to decrease when Indonesian CPO
export prices tend to weaken. Although exchange rates are rising, with cheaper export
prices, it encourages producers to reduce their CPO exports. The development of
export prices of CPO and export volume can be seen in the following figure
150000.00 1500.00
100000.00 1000.00 USD/Ton Ekspor
Ton

50000.00 500.00
HEC
0.00 0.00

Source: BPS 2006 - 2015 and Bappepti

Figure 6. Export of CPO and CPO Export Prices
Figure 6 shows no link between CPO export price and volume. CPO export
prices are considered the same for all destination countries. This is done to see the
comparison of CPO export price of Indonesia with the price of CPO competitors'
goods, namely soybean oil. Competition between the two vegetable oils can be seen
from the price competition in the following graph
Sumber : BPS 2006 – 2015 dan Bappepti
 2000.00 150000.00
1500.00 100000.00
1000.00 HMK
500.00 50000.00
HEC
0.00 0.00
Ekspor CPO

Source: USDA 2006 - 2015, Bappepti, and BPS

Figure 7. Development of Soybean Oil Price and CPO Export Price
Figure 7 shows the superior price of Indonesian CPO exports with international
prices of soybean oil, where Indonesian CPO export prices are cheaper than
international prices of soybean oil.
The problems of the above macro and micro economic sectors are indicated to
be related to Indonesian CPO exports. Indications are taken from export-related
theories. If it is seen from the graph that the linkage is not clear then to prove the
linkage between insturmen - macro and micro economic instrument to CPO export
conducted research related to factors related to export of Crude Palm Oil Indonesia.
Identification of problems
How to balance long-term and short-term CPO export prices, world soybean oil prices,
domestic CPO production, inflation, Rupiah exchange rate against US Dollar, export
tax applicable to Indonesia Crude Palm Oil (CPO) exports.
Research purposes
Analyzing the long-term and short-term balance of export prices of CPO, world
soybean oil prices, domestic CPO production, inflation, Rupiah exchange rate against
US Dollar, export taxes applicable to Indonesian Crude Palm Oil (CPO) exports.
Benefits of research
1. As a material consideration of the government in making decisions and make policy
for the export of Crude Palm Oil (CPO).
2. Consideration for Crude Palm Oil (CPO) producers and exporters of Crude Palm
Oil (CPO) in the production and export of CPO products to avoid loss.
3. As material consideration and information for further researchers.
THEORETICAL BASIS
International trade

International trade theory is divided into two classifications of classical theory

and modern theory. The classical theory of international trade is known to have 3
theories namely Adam Smith's theory (absolute advantage). This theory is based on
real non-monetary values so often known as the pure theory of international trade.
John Stuart Mill Theory (relative advantage). This theory states that a country will
produce and then export an item that has comparative advantage and imports goods
that have comparative disadvantage, ie a goods that can be generated cheaper and
import goods which if produced alone will eat a large fee. And David's theory Ricardo
(comparative cost). This theory states that although one country is less efficient than
other countries in producing both commodities, there is still a basis for trade that
benefits both parties (Salvatore, 2014).

Furthermore, modern theory is known there are 3 theories of Heckser Ohlin

theory (factor proportion), the theory of factor abundance. The theory explains that
international trade takes place on the basis of different comparative advantages of each
country. The last international trade theory is a partial theory or a principled demand
and supply that trade between two countries arises because of differences in demand
and supply (Gerber, 2014).

Theory of Exchange Rates

Exchange rate is divided into two types namely the nominal exchange rate and
the real exchange rate. The nominal exchange rate is the value of the foreign currency
against the domestic currency unit, the nominal exchange rate can not describe the
economic strength in a government, the real exchange rate is able to describe the
economic strength. The real exchange rate affects the trade of a country. The effect is
the tendency to buy imported or domestic goods. If the exchange rate decreases then
the consumer tends to buy imported goods and vice versa. This is related to consumer
preferences in terms of price. If the exchange rate decreases the price of domestic
goods is relatively more expensive and vice versa. Consumer shift to domestic goods
resulted in increased export value (Maryana, 2011).

Inflation Theory

The definition of inflation was first proposed during the first world war where
inflation was a surge in demand for some commodities but the state or local
government was unable to meet the spike in demand. Inflation is an implication of a
condition in which more money is circulating than goods in the market. Inflation also
illustrates the general condition of price increases. The cause of inflation can be
identified from the source of inflation. All the factors driving aggregate demand to the
top right as well as the aggregate supply to the left are factors that cause inflation. The
inflation caused by the pull of aggregate demand is called demand push inflation and
inflation caused by a shift in the aggregate supply curve to the left is called inflation
due to the push push of supply (Supriana, 2011).

Previous Research

Pinem (2013) entitled the analysis of factors affecting Indonesia's Crude Palm
Oil (CPO) exports to the EU. The results of this study reveal that the policy of trade
and consumption of CPO of the European Union influences the volume of Indonesian
CPO exports to the EU. Similar to the price of rapeseed oil, soybean oil, EU GDP.
Meanwhile, CPO price negatively affects the export volume of Indonesian CPO to the
European Union. For the export elasticity CPO is not sensitive to changes in CPO
prices, rapeseed oil prices, soybean oil prices, trade policies and consumption of CPO
EU.

Radifan (2014) entitled factors affecting Indonesia's Crude Palm Oil (CPO)
exports in international trade. The results of this study reveal that Indonesia's CPO
production, Rupiah exchange rate against US Dollar, and world crude oil prices in the
long term have a positive and significant effect on Indonesian CPO exports.
 Maygirtasari, et. al, et. al (2015) entitled factors affecting the export volume of
Indonesian Crude Palm Oil (CPO). The results showed that domestic CPO production,
domestic CPO price, international CPO price, and rupiah exchange rate against US
Dollar together significantly influenced the export volume of Indonesian CPO.
Partially, there are three variables that have significant influence to the export volume
of CPO Indonesia, namely domestic CPO production, domestic CPO price, and rupiah
exchange rate against US dollar, while international CPO price significantly influences
the export volume of Indonesian CPO.

Pratiwi (2011) with the title of determinant analysis of Indonesian Crude Palm
Oil (CPO) export to European Union. The results of this study reveal that the
exchange rate, CPO production, and cooking oil production have a positive influence
on CPO exports to the EU while per capita income, domestic CPO prices, world crude
oil prices have a negative effect on CPO exports to the EU

Son (2011) with the title of research analysis determinant of export volume of
palm oil of North Sumatera Province. The results of this study indicate that the
exchange rate of Rupiah, the price of oil palm fertilizer, the area of oil palm, and the
export price of palm oil have a positive influence on the export volume of North
Sumatra palm oil and land area has the most dominant influence.

Research Hypothesis

The hypothesis that can be drawn from the background exposure and the
theoretical foundation is that there is a long-term and short-term balance of CPO
export prices, soybean oil prices, and CPO domestic production on CPO exports. In
addition, there is a negative relationship between inflation, exchange rate and CPO
export tax on CPO exports

RESEARCH METHODS

Types And Data Sources

The data used in this research is weekly data from 2006-2015 so that the amount of
data in this research is 518 data. The data used in this study were obtained from
various sources. The following table types data and sources:

Table 1. Types And Data Sources

Sing Frekuensi
Data Satuan Sumber Data
katan Data
Volume Ekspor CPO VEC Mingguan Ton Badan Pusat Statistik
Badan Pengawas
Harga Ekspor CPO HEC Mingguan USD/Ton Perdagangan Berjangka
Komoditi
Harga Minyak Kedelai United State Depatment
HMK Mingguan USD/Ton
Dunia Agriculture
Produksi CPO PC Mingguan Ton Badan Pusat Statistik
Inflasi I Mingguan - Badan Pusat Statistik
Kurs K Mingguan Rupiah Bank Indonesia
Pajak Ekspor PE Mingguan USD/Ton Menteri Keuangan
Sumber : DBC, Dinbun, BPS, BI, USDA

Data analysis method

This study was conducted to see the long-term and short-term relationship between
variables. Therefore, this research data analysis is done by Engel Granger
cointegration analysis and completed with E-Views application. Cointegration analysis
is used to see the short-run and long-term relationship between CPO export and CPO
export price, domestic CPO production, export tax, inflation, nominal exchange rate,
and world soybean oil price. The Engle Granger cointegration testing steps are as
follows:

1. Test Stationaryity
Testing stationarity of each variable, namely CPO export, CPO export prices,
domestic CPO production, world soybean oil prices, inflation, exchange rate and
CPO export tax.
2. Formulation of multiple regression equations
 The formulation of multiple regression equation with CPO export as dependent
variable with independent variable is CPO export price, domestic production of
CPO, export tax, inflation, nominal exchange rate, and world soybean oil price.
3. Equality And Residual Stationary Test
If the CPO export regression equation is obtained, the stationary equations and
residuals are re-tested.
4. Comparison of stationary equations and residuals
Compare the stationarity of the regression equation with its residual. After the
comparison is done it can be seen cointegration between the dependent variable
that is CPO export with independent variables ie CPO export price, soybean oil
price, domestic CPO production, inflation, exchange rate, and CPO export tax.

Test Stationaryity

Time series data has a condition to be stationary so that the resulting estimation is not
spurious or fake. The stationary data requirements are as follows:

E (X_t) = constant for all t

Var (X_t) = constant for all t

Cov (X_t, X_ (t + k)) = constant for all t and k where k ≠ 0

The stationary data has a tendency to approach the average value and fluctuate around
its mean value. Time series data are generally not stationary or contain unit roots and
variance change over time (Wooldridge, 2013). Time station staticity test is
statistically tested by Augmented Dickey Fuller (DF Test) test. The DF root unit
assumes a trend between inter-residual autocorrelation with independent variables in a
time series empirical equation.

The stationarity test is done by comparing the DF statistic value with the Kinnon Mac
probability value and the critical value of Augmented Dickey Fuller. The DF test is
performed on each variable. Each variable is formulated in autoregressive form. The
general form of the autoregressive equation is as follows (Brooks, 2008)

𝑦̂t =αyt-1 + ... + αyt-n + ut (1)

Information :
y t = Estimated dependent variable
α = Autoregressive coefficient
yt-1 = value of the dependent variable 1 previous period
yt-n = the value of the dependent variable in period n
μt = Standard Error

The stationarity test was performed by statistical DF ratio with the critical value of DF
and Mac Kinnon. The DF count can be calculated with the following formula (Greene,
2002):

̂
𝑦
DFt = 𝑦̂ .𝑡 𝜎 (2)
𝑡

Where: (y_t) = Dependent variable estimate σ = Standard error

The Mackinnon value is formulated in the following formula (Kinnon, 2010):

β∞ + β1/t + β2/ t + β3/ t (3)

Where: β∞, 1, 2, 3 = The value of provisions in the Kinnon Mac table in Appendix 1

t = Number of observations, observations or data

H0 accepted: DF <Critical Value DF or Mc Kinnon

H0 rejected: DF> Critical DF or Mc Kinnon

If all data is stationary at the level, it can be tested immediately - the next test.
However, if the test at the level indicates the data is not stationary then the estimation
is done again in the first difference form. The general form of the first difference
autoregressive equation is
̂ t = αΔyt-1 + αΔyt-2+ ... + αΔyt-n + μt
∆𝑦 (4)

Description: (Δy_t) = The estimated value of the y variable at the differentiated t time
α = Value of autoregressive coefficient of differentiation of variable
y on time t
Δyt-1 = Variable differentiation value y at time t-1
Δyt-2 = Variable differentiation value y at time t-2
Δyt-n = Variable differentiation value y at time t-n
n = Number of samples or data
μt = Standard error variable y

Cointegration Test

Engle Granger's cointegration approach consists of two stages. The first stage is done
by regressing the dependent variable with the independent variable, so that obtained
regression equation as follows

𝑌𝑡 = 𝑏0 + 𝑏1 𝑋𝑡 + 𝑒𝑡 (5)

The dependent and independent variables may not be stationary at the level,
but the residuals of the regression equations should be stationary at the same
differentiation (stationary in the first differentiation). To show that, the equation is
rewritten as follows:

𝑒𝑡 = 𝑌𝑡 − 𝑏0 − 𝑏1 𝑋𝑡 (6)

Equation (6) if interpreted in this study into the following equation

𝑉𝐸𝐶𝑡 = 𝛼 + 𝛽𝐻𝐸𝐶𝑡 + 𝛾𝐻𝑀𝐾𝑡 + 𝛿𝑃𝐶𝑡 + 𝜀𝐼𝑡 + 𝜁𝐾𝑡 + 𝜂𝑃𝐸𝑡 + 𝑢𝑡 (7)

In the research of error term equation can be seen in the following equation

𝑒𝑡 = 𝑉𝐸𝐶𝑡 − 𝛼 + 𝛽𝐻𝐸𝐶𝑡 + 𝛾𝐻𝑀𝐾𝑡 + 𝛿𝑃𝐶𝑡 + 𝜀𝐼𝑡 + 𝜁𝐾𝑡 + 𝜂𝑃𝐸𝑡 (8)

The second stage is done by unit root testing of the error term with the same
hypothesis as the root hypothesis of the ADF unit. Error term is a linear combination,
if the null hypothesis is rejected or significant then the stationary term error variable at
the level, and the two variables are cointegrated. Although the variables used are not
stationary at the level but in the long run those variables tend to be in balance.
Therefore, the linear combination of these variables is called cointegration regression
and the parameters resulting from the combination can be called co-integrated
parameters or long-term coefficients. Decision making of Granger cointegration
method is:

Ho accepted: (ADF stat> Prob Mckinnon) variable> (ADF stat> Prob Mc Kinnon)
residual

Ho accepted: (ADF stat> Prob Mc Kinnon) variable <(ADF stat> Prob Mc Kinnon)
residual

RESULTS AND DISCUSSION

Test Stationaryity

Testing time series data must be started from the assumption of time series analysis
that is stationarity. If this assumption is not met then the resulting estimation results
will be false and the resulting policy or decision is not appropriate. The following test
results stationeritas time series data conducted in this study. The test was performed
with the help of the E-Views application and comparing the ADFstat value with the
critical value of ADF 1%, 5%, and 10% and the Mac Kinnon value of the Mac Kinnon
table
Table 2. Stasionerity Testing

Nilai Kritis ADF Nilai

Kritis
Variabel Tingkat Unit Akar Nilai ADF Statistik
1% 5% 10% Mac
Kinnon
Harga
Level 1,70 3,44 2,86 2,56 0,42
Ekspor
CPO
1st difference 29,98 3,44 2,86 2,56 0,00
(HEC)
Harga Level 2,03 3,44 2,86 2,56 0,27
Minyak
Kedelai 1st difference 20,20 3,44 2,86 2,56 0,00
(HMK)
Level 7,98 3,44 2,86 2,56 0,00
Inflasi (I)
1st difference 17,9 3,44 2,86 2,56 0,00
Level 0,31 3,44 2,86 2,56 0,97
Kurs (K)
1st difference 18,46 3,44 2,86 2,56 0,00
Pajak Level 1,56 3,44 2,86 2,56 0,49
Ekspor
(PE) 1st difference 30,38 3,44 2,86 2,56 0,00
Produksi Level 2,78 3,44 2,86 2,56 0,06
CPO
Domestik 1st difference 19,34 3,44 2,86 2,56 0,00
(PC)
Volume Level 5,94 3,44 2,86 2,56 0,00
Ekspor
CPO 1st difference 20,72 3,44 2,86 2,56 0,00
(VEC)
Sumber : Lampiran 9,10,11,12,13,14,15,16,17,18,19,20,21, dan 22

Table 2 shows the stationarity value of each variable in this study. Stationary value
indicates that data on CPO export prices, world soybean oil prices, inflation, CPO
export taxes and domestic CPO production stationary at the level level. While
stationary inflation variable at level level good compared to value of criteria of ADF
and probability of Mc Kinnon. Based on this comparison, the estimation of all
independent variables on dependent is done at the first difference level.
4.3. Engle Granger Cointegration Test

The Engle Granger cointegration test is performed to obtain a stable long-term

relationship between the integrated variables of the same degree. Based on the
stationar test, all the variables in this study stationary on the same degree of first
difference with the ADF test. Thus it can be done Engel Granger Cointegration Test
by regressing the equation between the dependent variable that is the Export Volume
CPO (VEC) with independent variables ie CPO export price (HEC), world soybean oil
price (CPO), CPO domestic production (PC), inflation (I ), Rupiah exchange rate
against US Dollar (K), and CPO export tax (PE).

Residual equations to be obtained, tested kestasionerannya with ADF test. If the

residual does not have a root unit it can be said that the variable used tends to be long-
term or cointegrated over the long term.

Based on the results of Engel Granger cointegration formed the equation to identify
the relationship of CPO exports with CPO export prices, soybean oil prices, CPO
production, inflation, exchange rate, and CPO export tax.

Table 3. Test ADF on the residual regression equation

Test critical
ADF Variabel ADF Persamaan Regresi
ADFStat values
First residual
Variabel First Different
Level [I(0)] Different Level [I(0)] ADFstat
[I(1)] 1% 5% 10%
[I(1)]
ADFstat Prob ADFstat Prob ADFstat Prob ADFstat Prob
*
VEC 5,94 0,00 20,72 0,00
HEC 1,70 0,42 29,98 0,00
HMK 2,03 0,27 20,20 0,00
PC 2,78 0,06 19,34 0,00 95,73 0,00 1001,26 0,00 7,62 3,44 2,86 2,56
I 7,98 0,00 17,90 0,00
K 0,31 0,97 18,46 0,00
PE 1,56 0,49 30,38 0,00
(*) adalah variabel dependen
Sumber : Lampiran 9,10,11,12,13,14,15,16,17,18,19,20,21,22,23, dan 24.

Having tested the cointegration between variables can be formulated long-term

and short-term cointegration equation. Long-term cointegration is formulated by
including the default form of the regression equation that has been obtained. Here's the
equation:

̂ = 10,176,15 + 33,09ln(𝐻𝐸𝐶) + 0,69 ln(𝐻𝑀𝐾)𝑡 − 162,72 ln(𝐼)𝑡 −

ln(𝑉𝐸𝐶)𝑡 𝑡

1,52 ln(𝐾)𝑡 − 99,07ln(𝑃𝐸)𝑡 + 0,15 ln(𝑃𝐶)𝑡 𝑅2 = 0,840939 (9)

The estimation results show that this model can explain that CPO export
cointegrated with HEC, HMK, I, K, PE, and PC in the long term is 84% because R2 is
worth 0.840936. The presence of cointegration between VEC and its independent
variables represents a long-term balance. There is a long-term balance between any
independent variables such as CPO export prices (HEC), soybean oil prices (HMK),
CPO domestic production (CP), inflation (I), exchange rate (K), export tax (PE) index
contains information for the dependent variable that is export.

Equation (31) shows that in the long term, CPO exports tend to increase by
33.09 units if the price of CPO exports increases by 1 unit. When compared with
previous research, the results of this study are in accordance with the results obtained
by Son (2011). However, the interpretation of export prices in this study is not the
same as the result of research by Putri (2013) and Kania (2014). The two previous
studies obtained a negative interpretation of the export price of CPO to the export
volume of CPO.

The second variable in the equation is the price of soybean oil showing a
coefficient of 0.69 indicating that the export of CPO will increase by 0.69 units if the
price of soybean oil increased by 1 unit. This is in accordance with the theory, where
soybean oil is the main competitor of CPO. In fact the price of soybean oil is more
expensive than CPO. If soybean oil prices increase and cateris paribus on CPO export
prices, it will further keep the price of CPO oil in the CPO and consumers will
increasingly switch to CPO. Interpretation of the second independent variable that the
world soybean oil price (HMK) in the long and short term indicates a positive
interpretation. This interpretation is in accordance with 3 (three) previous studies of
Pinem (2013), Princess (2013) and Kania (2014).
 The next variable that becomes regressor in equation 31 is inflation. The
obtained inflation coefficient is 162.72 in negative form. This illustrates that any one-
year inflation increase in the long run will likely lower CPO exports by 162.72 tons.
However this value is not significant with a probability value of 0.87. This illustrates
that inflation does not directly affect Indonesian CPO exports. In the previous study no
one used inflation as an independent variable or regressor. Therefore, the comparison
of inflation interpretation results of this study is no comparison of previous research.

The next independent variable is the rupiah exchange rate against the dollar.
This variable is made independent as Indonesian exports generally use the US dollar.
The coefficient of this variable shows a significant value where the probability value
below α 5% (0,05) is 0,006. The coefficient value is 1.52 with a negative sign. This
illustrates that if an increase in the exchange rate of one unit will decrease the export
of CPO in the long term at 1.5 tons. This is consistent with the interpretation of
exchange rates on Radifan research (2014) with a positive interpretation of long-term
cointegration. The interpretation of other research on the relationship of exchange rate
to CPO export is by Siahaan (2013), Putri (2013) and Maryana (2013). However,
Maryana (2013) shows the negative interpretation of exchange rate on CPO exports in
the long run.

The next variable that becomes independent in the long term cointegration
equation of this research is the export tax (PE). This variable is below α 5% (0,05) that
is 0,00. The coefficient of this export tax variable is 99.07 with a negative sign. This
interpretation of the export tax coefficient illustrates that if a government export tax
increase by one unit will likely lower Indonesia's CPO export by 99.07 tons. The
results of this study are in accordance with the interpretation obtained by Saragih
(2015) where the export tax shows a negative correlation to CPO exports.

The last variable that becomes regresor in long term cointegration equation is
CPO (PC) production. The co-efficient co-efficient coefficient of CPO production is
0.15 with a positive sign. The value indicates an increase in CPO exports by 0.15 units
if CPO production increases by 1 unit. The results of this study in accordance with
previous research results are maygirtasari (2015), Pratiwi (2011), Siahaan (2013) and
Radifan 2014). In Radifan (2014), positive interpretations are also obtained on long
term cointegration interpretation.

Furthermore, for short-term cointegration is done by regenerating the residual

and the following equation is obtained:

𝑉𝐸𝐶𝑡 = 69,47 + 4,79𝐻𝐸𝐶 + 16,76𝐻𝑀𝐾 − 3615,37𝐼 − 4,84𝐾 − 16,14𝑃𝐸 +

0,007𝑃𝐶 − 0,77𝑅𝑒𝑠𝑡 (10)

The estimation results show that this model can explain that VEC is associated
with HEC, HMK, I, K, PE, and PC in the short term of 83% because R2 is worth
0.8392719. The presence of cointegration between VEC and its independent variables
represents short-term balance. It also obtained speed of adjustment of 77%. This
shows that there is an imbalance of 77% in each of the CPO export price, soybean oil
price, inflation, exchange rate, CPO domestic production, and export tax on CPO
exports in the short term in each period.

This interpretation of the coefficients of short-term cointegration equations

resembles the interpretation of coefficients in long-term equations. In the short term,
CPO export prices are not significantly related to CPO exports. This is indicated by
probability value above the value of α 5% (0,05) that is 0,74. Coefficient value 4.79
for CPO export price on short-term equation illustrates that in the short run, an
increase of 1 unit of export price will indirectly affect CPO exports of 4.79 units.
Comparison with previous research for the CPO export price of cointegrated on the
short term is absent. This is because there has been no research that cointegrated in the
short term.

Variable price of soybean oil, exchange rate, export tax and CPO domestic
production, the four independent variables are not directly related to CPO export. This
is caused by the probability value of the five variables are ditas value α 5% (0.05) that
is 0,0517 for the price of soybean oil, 0,0985 for exchange rate, 0,6377 for export tax,
and 0,6791 for domestic production of CPO. To see the value of linkage of four
variables can be seen from the coefficient value where 16,76 for the price of soybean
oil, -4,84 for exchange rate, -16,14 for export tax and 0,007 for CPO domestic
production. The coefficient value of the soybean oil price equation illustrates that in
the short run CPO exports will increase by 16.76 units if the price of soybean oil
increases by 1 unit. The value of the exchange rate coefficient showing the value -
4.84 indicates that in the short run CPO exports will decrease by 4.84 units if the
exchange rate increases by 1 unit. Furthermore, for the export tax variable, where the
coefficient value shows the value of -16.14 which means that in the short term CPO
export will decrease by 16.14 units if there is an increase of export tax of 1 unit. And
the last variable that is not significant is the production of CPO has a coefficient value
of 0.007 which means that in the short term CPO exports in the short term will
increase by 0.007 units if there is an increase in CPO production of 1 unit. In earlier
studies only domestic variables of CPO production have been interpreted in
cointegration in the short run. Interpretation done on the results of research by
Maryana (2011). Interpretation of CPO domestic production (PC) obtained a negative
interpretation. The results of Maryana's interpretation are different from the results of
this study, where the interpretation of domestic CPO production is positive in short-
term cointegration.

The value of the significance of independent variables that are below the value
of α 5% (0.05) is the variable inflation of 0.0335. This indicates that the inflation
variable in the short term is directly related to CPO exports. the coefficient value is
3615.370 indicates that CPO exports will tend to increase by 3615.37 units if inflation
increases by 1 unit. In the previous study, the inflation variable was not an
independent variable or regressor in short-term cointegration. Therefore, there is no
comparison of short-term interpretation of this study with previous research.

CONCLUSIONS AND RECOMMENDATIONS

Conclusion
1. In long-term relation, the export volume of CPO with CPO export price, soybean oil
price and CPO production shows a positive correlation. This means that CPO export
prices, soybean oil prices and CPO production tend to provide an increase in the
export volume of CPO. Meanwhile, the correlation between CPO export volume and
inflation, exchange rate and export tax shows a significant correlation that soybean oil
price, CPO production, inflation, and export tax of CPO tend to decrease CPO export
volume.
2. Similar conclusions on short-term cointegration, the correlation of CPO export
volume with CPO export prices, soybean oil prices and CPO production show a
positive relationship. This means that CPO export prices, soybean oil prices and CPO
production tend to provide an increase in the export volume of CPO. While the
correlation between the export volume of CPO and inflation, exchange rate and export
tax shows a significant correlation that soybean oil price, CPO production, inflation,
and CPO export tax tend to decrease the export volume of CPO
Suggestion
To CPO producers and exporters.
For CPO producers are expected to be responsive in looking at the export prices of
CPO exports. The higher the CPO export price then it is recommended to increase its
production. As for exporters are expected to respond to the development of export tax
and soybean oil prices. If the value of the two elements decreases, it is advisable to
exporters to increase their export volume.
To the Government.
The government is expected to be able to control macroeconomic factors that are
related to the export volume of CPO such as inflation, exchange rate, and export tax. If
the government is able to control these three elements then the possibility of CPO
producers and exporters more resilient to shocks from overseas economies such as the
spike in competitor commodity production.
To the next researcher.
The researcher is then expected to continue the CPO export study with CPO export
forecasting by adding observation time until 2017 and replace the data analysis
method with cointegration of ARDL.