Franky Oesman Widjaja, Chairman of Sinar Mas Agribusiness & Foods, expects Indonesia's crude palm oil production in 2016 to drop by 5-10 percent (y/y) due to the impact of the El Nino weather phenomenon that brought extreme dry weather to Southeast Asia in 2015. However, in several Indonesian regions palm oil plantations are now being plagued by floods giving rise to speculation whether El Nino is to be followed by La Nina. La Nina - the opposite of El Nino - brings cooler than average sea temperatures in the central and eastern tropical Pacific Ocean causing wetter-than-usual weather in Southeast Asia.

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Crude palm oil (CPO) output in Indonesia, the world’s largest CPO producer and exporter, may decline by 20 percent to 27.5 million tons in 2016 due to the negative impact of the El Nino weather phenomenon. On a positive note, declining CPO output in Indonesia could provide some support for benchmark Malaysian palm prices that fell to a 6.5-year low of 1,836 ringgit last week.

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