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ndonesia, the world'€™s biggest palm oil producer, may see higher production this year, though export volume will remain the same as last year because domestic use of the commodity is expected to grow.

Indonesian Palm Oil Producers Association (Gapki) secretary-general Joko Supriyono said on Wednesday that exports in 2014 might stay flat at the 21.2 million tons estimated for last year, as domestic consumption was slated to rise significantly on the back of the government'€™s new biodiesel policy.

Local demand may climb by 25 percent to 10 million tons this year.

Last September, the government raised the biodiesel portion in blended fuels to 10 percent, up from 7.5 percent. In addition to this, power plants are required to blend 20 percent biodiesel in energy mixes, starting from this month.

'€œWe are getting more serious in pushing for more local absorption this year. This will also make a difference in the overall market,'€ Joko said during an annual press briefing at his office.

Local biofuel demand may jump to 3.8 million kiloliters this year, up from 1.1 million kiloliters last year, according to a recent estimate by the Biofuel Producers Association (Aprobi).

Gapki estimated that exports in 2013 would surge by 16 percent to 21.1 million tons, while output might decrease by 1.9 percent to 26 tons from 2012.

However, output may rise by 7.7 percent to 28 million tons this year due to better weather conditions and a bigger harvest in maturing plantation areas.

Joko further said that the industry group did not anticipate a shift in export destinations this year and traditional markets would continue to dominate exports.

Last year, India was still the biggest export destination for Indonesian palm oil, buying around 6.1 million tons, up 5.17 percent from 2012.

The European Union and China came in second and third, sourcing about 4 million tons and 2.6 million tons, respectively.

Exports to Pakistan also rose markedly from a very low level to about 900,000 tons, nearly bouncing back to the level recorded before 2007 when Indonesian palm oil lost its competitive edge against Malaysian rivals due to a considerable tariff cut enabled by a preferential trade agreement (PTA).

Indonesia and Pakistan implemented a similar trade pact last year, which was proven to boost Indonesia'€™s exports throughout last year.

A significant pace of growth was also seen in new markets, such as the Middle East and Africa, where exports went up by 33 percent, and 13 percent, respectively, last year, according to the industry group.

Gapki executive director Fadhil Hasan said that the sizeable quantity of palm oil removed from the market due to higher Indonesian domestic use might help to push up prices this year.

Prices would likely range between US$900 and $950 per metric ton, compared to the cost, insurance and freight (CIF) of $841.67 per metric ton in Rotterdam, the Netherlands, throughout last year.

'€œThe prices will go up to that level because we will reduce the supply in their market, and because of the recovery in global demand along with economic recovery,'€ he said.