United States Department of Agriculture (USDA) forecasting Indonesia’ 2019-2020 palm oil output at 43.0 million tons - Photo: GAPKI

JAKARTA (TheInsiderStories) – United States Department of Agriculture (USDA) forecasting Indonesia’ palm oil output at 43.0 million tons (MT) during 2019 – 2020 from last year 41.5 MT, amid the expanding the mature area. While, Industrial consumption for 2018 – 2019 is revised up to 6.8 MT supported by strong overseas demand.

Post maintains 2019 – 2020 palm oil domestic consumption at 13.11 MT, said the report. Trade data indicates that palm oil export from October 2018 to May 2019 rose 9 percent from the same period the prior year.

The rate of growth represents a decline of 12 percent from October 2018 to March 2019. Accordingly, palm oil exports for 2018 – 2019 are lowered to 28.5 MT.

Post forecasts 2019 – 2020 exports at 29.5 MT, a 1.0 MT increase from 2018 – 2019. Strong global vegetable oil demand, especially from China where declining supplies of domestically produced oil is increasing demand for imports, present growth opportunities and should offset high Indian import duties, the attache said.

Palm oil exports have begun to erode over the foreign policies on some of Indonesia’ main export destinations, especially to India, China, Bangladesh, and European Union said an Indonesian palm oil association, known as GAPKI, days ago.

The organization recorded in April 2019, Indonesia’ CPO and derivatives, oleochemical also biodiesel decreased by 18 percent compared to total exports in March from 2.96 MT to 2.44 MT.

Later on, the export performance began to crawl up, but it was still below expectations. In May 2019, Indonesia’ CPO exports reached 2.79 MT, up 14 percent compared to the total exports in the previous month.

The agency reported that the total exports of CPO and its derivatives (excluding oleochemicals and biodiesel) in April 2019 declined 27 percent from 2.76 million tons in March to 2.01 million tons in April. In May, total exports were recorded at 2.40 million tons, an increase of 18 percent compared to the previous month.

But, the agency rated, that some of the main export destination countries have enacted regulations that are included in the category of trade barriers, for an example India, which raises palm oil import tariffs to the maximum.

As known, the refined product import tariff from Malaysia is 45 percent of the applicable tariff of 54 percent. As a result of the discount on import duties enjoyed by Malaysia, the Indonesian palm oil market to India is increasingly eroded, because the Indian market is dominated by Malaysia.

By this, the Indonesian government is expected to immediately accelerate economic cooperation with India for the implementation of the same import tariff, so that Indonesia can compete to enliven the Indian market.

Likewise with the European Union, since the adoption of the RED II Delegated Act last March, it is undeniable that it has helped to build up the negative sentiment of the Indonesian palm oil market in Europe.

The agency noted that the export of CPO and its derivatives to the Blue Continent continued to drop. In April 2019, CPO exports and derivatives from Indonesia recorded a 37 percent decline compared to March. Then in May again dropped 4 percent compared to April. In details, March 498,240 tons, April 315,240 tons and May 302,160 tons.

Another major export market is also experiencing dynamics in China. In April, the second largest country’ imports rosed by 41 percent compared to March, from 353,460 tons to 499,570 tons, then in May it dropped 18 percent (or from 499,570 tons down to 410,560 tons).

While, in the absorption of domestic biodiesel, throughout April was only able bought 516 thousand tons, or eroded 2 percent compared to last March. In May, uptake showed positive progress, reaching 557 thousand tons or up 8 percent compared to April.

The agency considered that if the domestic absorption program runs optimally is around 9 million tons, it can increase the absorption of the domestic market and reduce the impact of high stock. At the same time, Indonesia can reduce oil imports and do not need to depend entirely on global markets, especially Europe.

Furthermore, the organization urged the government to accelerate the palm oil replanting program to maintain the balance of the stock. Replanting will reduce production for the next few years, Indonesia will improve productivity and efficiency in the long run.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com

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