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Industry warns B50 push could slash palm oil exports, trigger global shortage
Agriculture Minister Andi Amran Sulaiman said on Tuesday that the government planned to cut CPO exports by 5.3 million tonnes annually, starting next year, as part of the biodiesel program.
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Major export: Workers transport palm oil fruit on a boat from plantations along the Kampar River to processing plants in Kampar, Riau, on Aug. 13, 2022. (AFP/Wahyudi)
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ndustry players have voiced concern that President Prabowo Subianto’s plan to mandate a 50 percent palm oil blend in biodiesel (B50) threatens Indonesia’s crude palm oil (CPO) exports, potentially leading to a global supply crunch as the country faces stagnant production and productivity.
Lower output in the world's biggest producer of the tropical oil could also lift benchmark Malaysian prices and trigger inflation at home due to costly palm oil products, according to the Indonesian Palm Oil Association (Gapki).
“Gapki views [the B50 program] as positive, and I’m confident the government won’t rush it while production remains stagnant. If we move ahead too quickly, exports will be the sacrifice,” Gapki chairman Eddy Martono said on Tuesday, as quoted by Bisnis.com.
The B50 program was estimated to require 11.5 million tonnes of palm oil, and if the blend were raised to B60, it could demand up to 22 million tonnes, Eddy said, which would further reduce the volumes available to be shipped overseas.
“With B40, our exports are already set to drop by 2 million tonnes. If we push for B50, the [export volume] decline could reach 6 million tonnes,” Eddy added.
Read also: RI palm oil exports to fall in 2024 on rising demand, lower output
Indonesia uses the world’s highest proportion of palm oil in its biodiesel, with the mandatory program aiming to reduce reliance on imported diesel and ramp up demand for domestic vegetable oils, primarily CPO.
