Indian authorities increased the duty on crude palm oil (CPO) imports by five percentage points to 12.5 percent. The consequence of this move is that it becomes more difficult for Indonesia and Malaysia to reduce their CPO stocks (which have reached near record highs) implying CPO prices have limited room to rise. As such, palm oil remains in a bear market, a situation primarily caused by the hard landing of China’s economy and a rout in crude oil prices.

Indonesian palm oil output in September may still be high despite ongoing forest fires on Sumatra and Kalimantan somewhat disrupting harvests.

On 25 August 2015 benchmark palm oil futures in Kuala Lumpur fell to a six-year low of 1,863 ringgit. So far this year, prices have eased around six percent.

The weak rupiah, which has depreciated nearly 16 percent against the US dollar in 2015, has mixed effects on the performance of Indonesian palm oil growers. On the one hand, earnings improve as CPO exports are traded in US dollars (while earnings are mostly reported in rupiah). On the other hand, those Indonesian palm oil growers that have significant US dollar debt will experience severe foreign exchange losses.

Indonesian Palm Oil Production and Export:

    2008   2009   2010   2011   2012   2013   2014   2015¹
(million metric tons)
  19.2   19.4   21.8   23.5   26.5    27.0    31.0    31.5
(million metric tons)
  15.1   17.1   17.1   17.6   18.2    21.2    20.0    19.5
(in USD billion)
  15.6   10.0   16.4   20.2   21.6    19.0    21.0   

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