Meanwhile, crude palm oil (CPO) production in the world's leading producers and exports - Indonesia and Malaysia - has also been affected by negative weather conditions. El Nino-inflicted dry weather in Southeast Asia in 2015 and the start of 2016 curbed CPO output in these countries and managed to push palm oil prices higher in the first quarter of 2016. As a result the price difference between palm oil and other edible oils is not that significant, implying that global demand for palm oil has not surged too sharply, Hasan said. Industries tend to switch between various edible oil - that are interchangeable in the production process - depending on prices.

However, Gapki noted that there occurred a whopping 564 percent (m/m) increase in palm oil shipments to the USA (81.3 million tons in April 2016). This growth was attributed to the declining edible oil reserves in the world's top economy. Demand for Indonesian palm oil from other countries rose as well. Demand from African countries increased 40 percent, followed by India (+32 percent), Pakistan (+26 percent), the European Union (+18 percent), and Bangladesh (+17 percent).

The notable exception is China. The world's second-largest economy has been reducing palm oil imports from both Malaysia and Indonesia since the start of 2016 as it prefers to import soybean oil.

Sahat Sinaga, Executive Director at the Indonesian Vegetable Oil Refiners Association (GIMNI), expects the growth in exports of crude palm oil and processed palm oil products to continue. In the first quarter of 2016 Indonesia's crude palm oil shipments reached 8.23 million tons, up 4.5 percent on a year-on-year basis.

Earlier this week the Indonesian government announced that it decided to keep its export tax for crude palm oil at USD $3 per ton in June, unchanged from the preceding month. This tax had been scrapped between October 2014 and May 2016 due to the low palm oil price. The recently rising palm oil price trend is caused by disappointing production (due to the influence of El Nino) and rising consumption in Indonesia on the back of the government's biodiesel program.

Regarding Indonesia's palm oil production in 2016, Hasan expects to see stagnation due to weather-related matters. Several palm oil producing regions on Sumatra are showing declining production volumes. In April 2016 Indonesia produced 2.34 million tons of crude palm oil, up a mere 1 percent from CPO production one month earlier.

Indonesian Palm Oil Production and Export Statistics:

  2008 2009 2010 2011 2012 2013 2014 2015  2016
(million tons)
 19.2  19.4  21.8  23.5 26.5  30.0  31.5  32.5  31.0¹
(million tons)
 15.1  17.1  17.1  17.6 18.2  22.4  21.7  26.4  25.0¹
(in USD billion)
 15.6  10.0  16.4  20.2 21.6  20.6  21.1  18.6  17.0¹

¹ indicates forecast
Sources: Indonesian Palm Oil Producers Association (Gapki) & Indonesian Ministry of Agriculture