Export of Indonesian crude palm oil (CPO) as well as derived products is expected to reach 22 million tons in 2014. As this year's CPO price is expected to average USD $1000 per ton, significantly higher than the average of USD $850 per ton in 2013, it will translate into higher revenue from the country's palm oil sector. The value of Indonesian CPO export in 2014 is estimated to accelerate to USD $22 billion due to dry weather threatening crops in Indonesia and Malaysia. Indonesia is the world's largest producer and exporter of palm oil.
Executive Director of the Indonesian Palm Oil Association (Gapki) Fadhil Hasan said that Indonesia's CPO export volume remains stagnant in 2014 from one year before. However, as the CPO price has improved, the country will earn more foreign exchange than in 2013. Particularly when the mandatory ten percent biofuel program runs smoothly this year, it will lead to increased domestic demand and consumption of CPO.
The government of Indonesia announced last year that the minimum bio content in diesel would be raised to 10 percent from 7.5 percent previously, while for power plants the minimum requirement was doubled to 20 percent. The government's new policy aims to curb imports of expensive oil (which is the primary reason for the country's trade deficit) by burning more palm-based biodiesel. When this program runs smoothly, it will turn Indonesia into a major CPO consumer, thereby pushing up the global CPO price as the supply on the international market reduces. However, a concern is that the advance in palm oil prices implies that blending in biodiesel becomes less attractive. Currently, state-owned energy company Pertamina buys biodiesel from local producers based on the cheaper Mean of Platts Singapore (MOPS) price instead of the international biodiesel price. Stakeholders urge the government to provide biofuel subsidies to palm oil producers.
Indonesia's Palm Oil Production and Export:
(million metric tons)
(million metric tons)
(in USD billion)
¹ indicates estimate
Sources: Food and Agriculture Organization of the United Nations, Indonesian Palm Oil Producers Association (Gapki) and Indonesian Ministry of Agriculture
Production of palm oil in Indonesia is projected to reach 28 to 30 million tons in 2014. Exports of CPO are one of Indonesia's most important foreign exchange earners.