Traditionally, exports of CPO rise in the second half of the year due to higher global demand amid several religious festivities (Ramadan, Idul Fitri and Christmas) as well as New Year. As such, CPO exports in the second half of the year usually account for roughly 70 percent of total CPO exports in a year.

Indonesian Palm Oil Production and Export:

    2007   2008   2009   2010   2011   2012   2013   2014¹
(million metric tons)
  16.8   19.2   19.4   21.8   23.5   26.5    26.0    26.5
(million metric tons)
   n.a   14.2   15.5   15.6   16.5   18.1    21.2    21.1
(in USD billion)
   n.a   15.6   10.0   16.4   20.2   21.6    19.0    18.9

¹ indicates forecast
Sources: Food and Agriculture Organization of the United Nations, Indonesian Palm Oil Producers Association (Gapki) and Indonesian Ministry of Agriculture

An official at Gapki said that Indonesian CPO exports have already started to grow in May 2014 after plunging considerably in the previous month. In April, only 1.38 million tons of CPO were exported. However, this recovered in May to 1.7 million tons (a 23 percentage point growth month-to-month) mainly due to higher demand from Muslim countries such as Bangladesh and Pakistan (ahead of the holy fasting month of Ramadan). Gapki stated that demand for Indonesian CPO from these two countries surged 336 percent (mtm) in May although in terms of volume it remains modest compared to CPO exports to China or India.

Increased demand for Indonesian CPO in the second half of 2014 can grow further if a new El Nino cycle emerges later this year. Since March 2014, speculation about a new cycle spread. This weather phenomenon can result in CPO production rates to drop by 5 to 10 percent (thereby positively affecting the CPO price).

The performance of Indonesia’s CPO export sector is also affected by the country’s domestic CPO consumption, particularly in the context of the government’s biofuel program. The Indonesian government raised the mandatory amount of palm oil (fatty acid methyl ester) blended in biodiesel from 7.5 percent to 10 percent in 2013 (for power plants that use biodiesel, the mandatory amount has been raised to 20 percent). The Association of Indonesian Biofuel Producers (Aprobi) stated that the mandatory amount will increase further to 20 percent by the period 2016-2020. However, the biofuel program has not functioned optimally yet. This year, the program is expected to require about 2.5 million tons of CPO, an increase from 1 million ton in 2013. If the program will expand, then it will reduce CPO exports from Indonesia.   

In 2013, total CPO exports from Indonesia, the world’s largest producer and exporter of this commodity, stood at 21 million tons (or USD $19 billion). Most of Indonesian CPO is shipped to India, Eurozone, China, USA, Pakistan and Bangladesh.

Indonesian CPO production in 2014 is estimated to reach 26 to 27 million tons. This is slightly lower than the initial forecast of 29 million tons but higher than last year’s realization of 26.0 million tons.

Indonesian Palm Oil Export 2014:

Period      Million Ton
January           1.57
February           1.58
March           1.79
April           1.38
May           1.70
June¹           1.80
Total           9.82

¹ indicates forecast
Source: Indonesian Palm Oil Producers Association (Gapki)