Palm Oil Industry Update Indonesia: CPO Production at 40 Million by 2020?
Indonesia’s production of crude palm oil (CPO) is expected to reach 40 million tons in 2020, in line with the government’s national program and downstream CPO roadmap. At the 3rd Indonesia International Palm Oil Processing Machinery & Technology Exhibition, Pranata, Director of Forest and Plantation Industries at the Indonesian Industry Ministry, said that, based on the roadmap, targeted CPO production growth should average 6.8 percent per year up to 2020, so the country will produce 40 million tons by that year.
Based on the roadmap, growth of Indonesia’s CPO production is to be boosted by persistent focus on the development of downstream products, so that upstream production is increase accordingly. In the year 2011 there were 54 types of palm oil derivative products made in Indonesia. In 2014 this figure had risen to 154 derivative products.
Indonesia is the world’s largest CPO exporter and producer (with CPO production at 31 million tons in 2014). Meanwhile, based on data from the Indonesian Palm Oil Association (Gapki), Indonesia’s total CPO exports and its derivatives reached 20 million tons in 2014.
CPO and its derivative products account for about 20 percent of Indonesia’s total non-oil & gas exports and as such constitutes a key foreign exchange earner. However, it also means that the country’s economy is relying on palm oil export to a large extent. In times of high global palm oil prices (such as during the 2000s commodities boom) this is a blessing but when prices are low (as we have seen since 2009) then Indonesian exports dry up. On Wednesday (05/08), Malaysian palm oil futures hit an 11-month low due to concern about rising production (as the peak production weeks are coming) in combination with falling demand. The benchmark palm oil price fell 1.3 percent to 2,035 ringgit per ton yesterday (05/08). Vegetable oil analyst Dorab Mistry expects that the price will decline further over the next two months and may hit 1900 ringgit by the end of September. This year so far the price has declined approximately 11 percent.
However, Pranata pointed out an important change. A few years ago, Indonesia’s palm oil exports consisted for 70 percent of CPO and 30 percent of processed palm oil products. In 2014 these figures inverted to become 30:70.
Indonesian Palm Oil Production and Export:
(million metric tons)
(million metric tons)
(in USD billion)
¹ indicates forecast
Sources: Food and Agriculture Organization of the United Nations, Indonesian Palm Oil Producers Association (Gapki) and Indonesian Ministry of Agriculture
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