Exports of palm oil from Indonesia are falling due to a rising local demand and lower production
An industry official said on Thursday that Indonesian palm oil exports will likely decline this year because of increased domestic consumption due to a higher biodiesel blend mandate and a small decrease in production.
Exports would be limited and benchmark Malaysian prices supported by a lower production in the world's largest producer of tropical oil.
Fadhil hasan, the head of the trade division of the Indonesian Palm Oil Association, told the Globeoil conference in Mumbai that the country's exports may fall by 2 million metric tones, from 30.2 million tonnes, in 2024.
He said that exports in the first half 2024 fell 7.6%, to 15,06 million tons.
He said that the dry weather of last year is reducing yields.
This year, neither the productivity nor the area has improved. This year, we expect a production reduction of 1 million tons.
According to GAPKI, production fell from 27.3 to 26.2 millions tons in the first six months of last year.
Hasan stated that even if the production level in the second half of the year remains the same as last year, the output will be lower at the end of the year.
Indonesia will increase the percentage of palm oil in biodiesel from 35% to 35% by 2023, and implement it across the country starting August 1, 2023.
He said that palm oil consumption would reach a record of 24.2 million tonnes in 2024, up from 23.2 millions tons last year.
Last month, Indonesia’s energy minister announced that it will increase the blend to 40% by January 2025 in order to reduce fuel imports as well as emissions from fossil fuels.
Hasan explained that the rising demand will reduce the surplus of biodiesel for exports and help Jakarta to raise funds to implement their biodiesel program.
The government should carefully examine trends in production and exports prior to increasing the blend mandate. Exports provide revenue to support the biodiesel programme." (Reporting and editing by Varun H. K. and Rashmia Aich; edited by Rajendra J. Jadhav)
(source: Reuters)
