Palm Oil's Price Swings More Than the Companies That Grow It. Here's the Cycle Behind AALI and Its Peers
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5 min read
In 2025, the price Astra Agro Lestari (AALI) got for its crude palm oil went up 11%. Its net profit went up 28.2%.
Why did profit jump more than twice as much as price? That gap is the whole story of the CPO price cycle, and it is the thing to understand before you look at any IDX plantation stock.
CPO means crude palm oil, the raw oil pressed from palm fruit. It is the product plantation companies sell. This post explains what moves its price, why profits swing harder than the price, and which rules from the Indonesian government can change the outcome.
Think of a plantation company as a business with mostly fixed costs. The trees are planted. The workers are hired. The mill is built. Those costs stay about the same whether CPO sells for a high price or a low one.
So when the price rises, almost all of the extra money becomes profit. When it falls, the same thing happens in reverse.
AALI's own 2025 numbers show this clearly. These come from the company's FY 2025 results release and investor newsletter:
| Item | 2025 result | Change vs 2024 |
|---|---|---|
| Average CPO selling price (per kg) | Rp14,316 (from Rp12,883) | +11% |
| Gross profit | Rp4.6 trillion | +38.6% |
| Net profit | Rp1.47 trillion | +28.2% |
Price rose 11%. Gross profit rose more than three times as fast. That is operating leverage: a small move in price, a big move in profit.
It is not only price. AALI also sold about 13% more volume in 2025, so some of the jump came from selling more, not only from selling higher. But the direction holds. Profit reacts more than price, in both directions.
CPO does not trade on company news. It trades on supply and demand, and a few forces repeat.
Palm trees need steady rain. El Niño is a weather pattern that brings hotter, drier conditions to Southeast Asia. La Niña is the opposite, wetter than usual.
The catch is timing. A dry spell does not cut harvests right away. Industry sources put the lag at about 12 to 16 months, because palm fruit takes a long time to form.
This is why the market can price in a shortage long before the shortage shows up in a mill. The Indonesian Palm Oil Association (GAPKI) has warned that a severe El Niño could cut Indonesia's output by up to 3 million tons the following year, roughly 5% of a year's production, according to reporting from China Daily.
Indonesia requires diesel to be blended with palm oil. Under the current B40 rule, the blend is 40% palm-based biodiesel and 60% regular diesel. Indonesia kept B40 for 2026, and a move to B50 was postponed over technical problems.
Why does that matter to a stock investor? Because the government has to buy a large amount of palm oil every year no matter what. That works like a floor under demand. It does not stop prices from falling, but it makes a deep collapse less likely.
Here is the part that surprises many new investors. The government can change a plantation company's profit with a rule, not with the market.
When a company exports CPO, it pays a levy to the state. Since 1 March 2026, the levy on CPO is 12.5%, up from 10%, according to InfoSawit. The money pays for the biodiesel subsidy. The Star reported on 21 August 2026 that Indonesia expects levy collection of Rp41.22 trillion in 2026, about 31% more than in 2025.
A higher levy means a bigger slice of each export sale goes to the state. The company keeps less.
DMO stands for domestic market obligation. It forces exporters to sell a set amount of palm oil at home before they can export.
The most famous case came in 2022. Indonesia banned palm oil exports on 28 April 2022 to bring down cooking oil prices. It lifted the ban within a month and brought back the DMO and DPO scheme instead. DPO is the domestic price obligation, a cap on the price for that local supply.
The lesson is simple. When cooking oil gets expensive at home, the government protects households first. Exporters absorb the cost.
You do not need to predict the weather. You can ask four plain questions about any palm company:
For wider context on how palm oil fits next to coal and nickel, read how Indonesia's commodity exports reach your portfolio.
Open NetWort's AALI page and look at the price history next to its drawdown. A drawdown is the fall from a peak to a low point before the price recovers. Then ask yourself one question: could I sit through a drop like that? That tells you more about plantation risk than any forecast.