Bayu Krisnamurthi, President Director of the BPDP-KS, said the drop in export volume is primarily caused by falling CPO production in Indonesia. Volatile weather conditions are behind this declining CPO production: after a dry spell (caused by the El Nino weather phenomenon), there emerged wetter-than-usual conditions (La Nina) in the last quarter of 2016.

Read more: Overview of Indonesia's Palm Oil Industry

However, falling CPO output in Indonesia had a positive impact on palm oil prices. Indonesia's reference CPO price rose around 35 percent to USD $750 per ton in December 2016 (from USD $557 per ton in January).

Krisnamurthi warned that the rising CPO price actually also implies weakening competitiveness for Indonesian palm oil in the global vegetable oil market: when palm oil prices rise, then soybean oil becomes more attractive.

At the end of December 2016 Indonesia's Ministry of Trade announced to re-introduce the USD $3 per ton export tax for CPO shipments in January 2017 as the government's reference palm oil price exceeded the USD $750 per ton threshold that separates the existence of export duties from zero rates.

Meanwhile, Krisnamurthi added that domestic consumption of subsidized (unblended) biodiesel in Indonesia reached 2.7 million tons in 2016, surpassing the target of 2.5 million tons.

Indonesia's Reference Crude Palm Oil Price:

Month      2015
     Price
(in USD/ton)
     2016
     Price
(in USD/ton)
     2017
     Price
(in USD/ton)
January      669.4      557.2      788.3
February      678.5      628.9
March      662.0      618.8
April      654.6      713.1
May      653.2      703.1
June      665.0      689.5
July      630.6      658.0
August      593.3      734.8
September      526.9      768.6
October      578.2      722.0
November      552.2      743.2
December      560.2      749.5

Source: Trade Ministry of Indonesia

Indonesian Palm Oil Production and Export Statistics:

  2008 2009 2010 2011 2012 2013 2014 2015 2016
Production
(million tons)
 19.2  19.4  21.8  23.5 26.5  30.0  31.5  32.5
Export
(million tons)
 15.1  17.1  17.1  17.6 18.2  22.4  21.7  26.2  25.7
Export
(in USD billion)
 15.6  10.0  16.4  20.2 21.6  20.6  21.1  16.5  17.8

Sources: Indonesian Palm Oil Producers Association (Gapki) & Indonesian Ministry of Agriculture

Bahas