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ndonesia's palm oil industry is set to increase its global market share next year as competitor Malaysia experiences a significant correction in output following the end of a high plantation cycle.

"We predict Indonesia might take 50 percent of CPO *crude palm oil* market share in 2010," Dorab E. Mistry, director of London-based Godrej International Ltd., said Friday after the closing ceremony of the three-day Indonesian Palm Oil Conference (IPOC) in Bali.

Indonesia is the biggest CPO producer in the world, accounting for 47 percent of world production. The country produced 19 million tons of CPO from 7.9million hectares of plantations last year, and is expected to produce 20 million tons this year and 22 million tons in 2010.

"The high cycles of palm oil plantations in Malaysia is over and the production will severely decline," Mistry said, adding Malaysia was currently in a replanting program.

"Besides, the country has a land shortage, so that it will make it difficult to expand plantations."

Malaysia's decreasing output will also be exacerbated by tree stress and dry weather caused by El Ni*o, which has created a pessimistic outlook for world CPO production in the second half of 2010, Mistry said.

Malaysia, currently the second-biggest CPO producer, may see its production drop from an expected 17.7 million tons this year to 17.5 million next year, he added.

With climate issues also at play, Mistry said Indonesia could still increase its production output due to its availability of farmland.

"With new plantations to produce more palm oil, Indonesia has an opportunity to boost its production and grab more market share next year," Mistry said.

"We have a rational estimate that CPO production from Indonesia will grow by 1 million to 1.5 million tons next year."

Without factoring in the impact from El Ni*o, analysts believe the CPO production increase in Indonesia can reach between 2 million and 2.5 million tons.

The CPO price climbed to its highest level in six months Friday after analysts predicted a 20 percent price increase in the first half of next year, Bloomberg reported, as drought disrupts supply and demand grows in China and India, the two biggest consumers.

The commodity advanced 3.4 percent to RM2,562 (US$758) per metric ton, the highest level since June 4.

Prices may soar to RM3,000 a ton by March, Mistry said.

So far this year, the CPO price has increased 50 percent as investors turn to commodities as a safe haven from the declining dollar.

Vegetable oils climbed 20 percent in November from a year earlier, the first gain this year, according to the FAO's Food Price Index.

The gauge rose to a record last year after concerns over food shortages spurred exporters to curb shipments.

"There's a fear for CPO production in 2010," Mistry said.

"I expect palm oil prices to rise at the fastest pace in relation to all other vegetable oils. The spread between soybean oil and palm oil will undoubtedly narrow."

CPO, which accounts for two-fifths of the world's edible oil, will be crucial for plugging supply gaps as El Ni*o-caused disruptions result in price shocks, Mistry said.

Bloomberg also cited a Solvent Extractors Association report that India imported a record 8.7 million tons of vegetable oils in the year ending Oct. 30, of which CPO accounted for 80 percent.