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Palm oil output, prices expected to rise this year
Palm oil producers are upbeat that this year will bring more luck as crude palm oil (CPO) production is expected to grow slightly and prices are forecast to pick up
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alm oil producers are upbeat that this year will bring more luck as crude palm oil (CPO) production is expected to grow slightly and prices are forecast to pick up.
Indonesian Palm Oil Producers Association (Gapki) executive director Fadhil Hasan said Monday he was optimistic that the country's CPO production would rise slightly this year if the El Niño weather phenomenon, which brings dryness for crops, was not prolonged.
'I think if El Niño isn't prolonged until February, our CPO output could reach around 33.5 million tons this year,' he said.
Indonesia, which is the world's largest palm oil producer, was estimated to have produced 32.5 million tons of CPO last year.
Fadhil added that global CPO prices would also likely work in favor of the industry as they were forecast to grow this year.
Global CPO prices strengthened to around US$562 per metric ton in December last year from $483.49 per metric ton in September, according to data from the Malaysian palm oil futures.
CPO prices are expected to trade as high as $700 a ton by the middle of this year because of increased palm-oil based biodiesel usage in Indonesia and the potentially ongoing El Niño weather phenomenon, according to agriculture business consulting firm LMC International.
Meanwhile, in terms of export volume, Fadhil argued that it would very much depend on the government's biodiesel program and global demands.
'If the B-20 program is fully implemented this year, our export volume may be lower because domestic demand will be on the rise,' he said.
B-20 is a government program that requires a minimum of 20 percent palm oil content in diesel for state-owned oil and gas giant Pertamina, set to be implemented this year. The program will replace the previous B-15 program requiring a 15 percent blend.
Last year alone, CPO export volume hit 25 million tons, surpassing an initial target of 20 million tons, according to Gapki estimates.
The increasing export volume was the result of rising demand from China, India and Europe at various times last year, despite their slowing economies.
In a separate development, the government has this month maintained the threshold that it applies to its monthly export tax for CPO.
When international and local CPO prices average below $750 per metric ton, the government imposes a zero percent export tax each month. The threshold has been imposed since March in a bid to ease local CPO business amid the price slump.
Global CPO prices dropped significantly from $1,170 per metric ton in December 2010 to around $562 per metric ton in December last year.
Indonesia's reference price for CPO hit $578.88 per metric ton this month, lower than $580.37 per metric ton in December, the Trade Ministry announced.
The reference price is calculated based on an average of CPO prices in the previous three months.
The Trade Ministry's acting director general for foreign trade, Karyanto Suprih, said that the lower reference price was due to the weakening of global CPO prices.
'The global price weakening is particularly due to the global oil price slump and an oversupply in the global vegetable oil market, especially for non CPO-vegetable oil that has become a CPO competitor,' he said.
