17 February 2020 (closed)
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Global demand for vegetable and animal oils is expected to reach 200 million tons in 2016, up 3 percent from demand one year earlier. About 70 million tons of total global vegetable and animal oils demand this year consists of crude palm oil (CPO). Indonesia, the world's largest CPO producer and exporter, is expected to produce about 30.5 million tons of CPO in 2016. Meanwhile, in the first nine months of 2016 Indonesia's CPO export realization stood at 18 million tons.
Sahat Sinaga, Executive Director of the Indonesian Vegetable Oil Refiners Association (GIMNI), stated that worldwide demand for vegetable and animal oils increases by an average of 3 percent (y/y) each year. Considering palm oil remains one of the most important oils, global CPO demand is estimated to grow by about 2.1 million tons each year. Therefore Sinaga emphasizes that - in order to remain the world's top producer - Indonesia needs to expand the size of its oil palm plantations, while applying new technology to boost productivity. The latter is possibly even more important as Indonesia has limited land available for oil palm plantation development.
Meanwhile, Bayu Krisnamurthi, President Director of the Indonesian Oil Palm Estate Fund (BPDP-KS), says Indonesian authorities have to come up with a better, long-term roadmap for domestic palm oil development. If a five-year moratorium on new palm oil plantation concessions is issued, it would mean Indonesia needs to allocate land for the production of other vegetable oils to meet long-term domestic demand. In fact, Krisnamurthi adds, for the production of other vegetable oils it would require more land compared to land necessary for palm oil plantations. In order to prevent local farmers from applying more slash-and-burn practices to meet future vegetable oil demand, authorities therefore have to come up with a comprehensive solution. Implementing a moratorium on oil palm concessions (which has already been in effect since 2011) is therefore not a real solution. Local Indonesian farmers' traditional slash-and-burn practices cause devastating forest fires (and toxic haze) across parts of Sumatra and Kalimantan every year.
The Indonesian Palm Oil Association (GAPKI) says there are about 24 million Indonesians dependent on the palm oil sector and therefore constitutes a crucial sector in terms of poverty alleviation. Moreover, this sector is one the largest foreign exchange earners for Indonesia. This is also the reason why Indonesian authorities try to persuade Asia-Pacific Economic Cooperation (APEC) members to put crude palm oil on the 'environmental good list' during the meeting in Lima.
On Wednesday (23/11) the 12th Indonesian Palm Oil Conference, with the theme "Palm Oil Development: Harmonizing Market, Society and the State", is scheduled to start on the island of Bali. This three-day conference, organized by GAPKI, will touch on topics such as palm oil market trends, other developments, and the price outlook.
Indonesia's Reference Crude Palm Oil Price in 2016:
Indonesian Palm Oil Production and Export Statistics:
(in USD billion)
¹ indicates forecast
Sources: Indonesian Palm Oil Producers Association (Gapki) & Indonesian Ministry of Agriculture