14 June 2022 (closed)
Jakarta Composite Index (7,049.88) +54.44 +0.78%
USD/IDR (14,146) -6.00 -0.04%
EUR/IDR (17,335) +57.05 +0.33%
Indonesia’s production of crude palm oil (CPO) is estimated to reach 31 million tons this year, up from an expected 29.5 million tons in 2014, according to the Indonesian Palm Oil Board (DMSI). Similar to last year, CPO production growth is limited due to unconducive weather conditions in the world’s largest producer and exporter of palm oil. Moreover, old trees have become less productive, while the younger generation of planted trees have not yet reached an optimal production age.
Amid the 2000s commodities boom, Indonesia’s palm oil production growth rate averaged 10 percent per year. In recent years, however, growth has declined significantly amid weak global economic conditions (resulting in weak CPO demand and declining CPO prices), limited palm oil plantation expansion due to the government’s primary forest moratorium (2011-2015) meaning a temporary stop to the granting of new permits to clear rain forests and peat lands, and weather conditions.
Floods in important palm oil growing regions in Malaysia (Terengganu, Pahang, Kelantan and Perak which together accounted for 30 percent of Malaysia’s total CPO output in 2013) have disrupted harvests, milling and transportation, implying that output in December and January will be curtailed. Malaysian authorities stated that a total of 7,500 smallholders - covering 24,000 hectares and 230 oil palm estates spanning 160,000 hectares - were affected. Unconducive weather conditions in Malaysia are expected to continue up to mid-January. Meanwhile, CPO stockpiles in Malaysia may decline from 2.7 million tons to 2 million tons in December 2014 due to limited production. Stockpiles may decline further as the Malaysian government implemented the Biodiesel B7 program (implying the blending palm biodiesel and petroleum diesel).
One advantage of limited CPO output in Indonesia and Malaysia is that it should support global CPO prices. The table below shows that the monthly palm oil price mostly fell in 2014. From September 2014, the price moved sideways after Malaysia and Indonesia - the world’s two largest CPO producers - introduced zero export tariffs for palm oil in an attempt to boost global demand and raise CPO prices. Although demand from India and China (the two largest CPO importers) is expected to remain sluggish in 2015, the global CPO price is estimated to grow slightly in the months ahead primarily due to limited CPO production in Malaysia and Indonesia.
Monthly Palm oil Price - US Dollar per Metric Ton:
Indonesian Palm Oil Export in 2014:
Source: Indonesian Palm Oil Association (Gapki)
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
• CPO production growth in Indonesia in 2015 expected to be limited
• Global CPO price expected to raise slightly in 2015 due to limited production growth in Indonesia and Malaysia
• Malaysia and Indonesia expected to maintain duty-free palm oil exports in first quarter of 2015
• Malaysia Confirms Duty Free Palm Oil Exports in Jan; Indonesia to Follow?
• Malaysia & Indonesia Expected to Maintain Duty-Free Palm Oil Exports
• Palm Oil Industry in Indonesia: Update on CPO Production & Export
• Analysis & Forecast of Indonesia’s Palm Oil Export and CPO Prices
• Analysis of the Palm Oil Industry in Indonesia