JAKARTA (TheInsiderStories) – Indonesian palm oil exports will hit a record, lifted by better-than-expected production, and a boost to demand from the spring retreat in prices, agrimoney reported.
The US Department of Agriculture’s Jakarta bureau hiked to 26.5 million tonnes (MT) its forecast for palm oil exports in 2017-18, on an October-to-November basis, a figure 1.0 MT, above the USDA’s official estimate.
The upgraded figure would represent the highest exports on record from Indonesia, the top palm oil shipper and producer, eclipsing the 25.96 MT shipped in 2014-15.
However, the bureau flagged a strong start to calendar 2017 for exports, besides a boost to supplies from production expected to beat earlier expectations.
Prices down, output up
In the first five months of 2017, “Indonesian palm oil product exports were 29% higher than the corresponding period in 2016”, the bureau said, noting in particular a rise of 818,000 tonnes in shipments to India, the top importer of the vegetable oil.
The rise in shipments was “attributable to declining palm oil prices during the first half of 2017”, with prices falling to $621 a tonne in June, from $726 early in the year, on expectation of production recovering from last year’s El Nino-depressed levels.
Indeed, the bureau, citing pegged Indonesia’s palm oil output in 2017-18 at a record 36.5 MT, 500,000 tonnes ahead of the USDA’s official estimate.
“Indonesian palm oil production is expected to benefit from favourable weather conditions in the upcoming months, fueling production increases following poor weather in 2016.”
‘Area expansion has slowed’
Hopes for a continued strong export performance have been supported by a Reuters poll of investors which pegged shipments last month at 2.20 MT, a rise of 22% year on year, if behind the 2.38 MT estimated for May.
Indonesia announced on Monday it was to keep at zero its export tax on palm oil for August, with duty typically not imposed below a reference price of US$750 a tonne.
Prices stood at $660 a tonne in Rotterdam as of last week. However, the USDA bureau cast a cloud over the rate of future growth in Indonesian supplies, given a slowdown in new plantings of oil palm trees.
“Indonesian palm area expansion has slowed as minimal lands remain available for planting in Sumatera and Kalimantan,” the bureau said.
“Overall planting expansion is occurring at a rate of less than 1%” a year.
In the Oxford Business Group report, the agency sees stronger yields are expected in 2017 for Indonesia – the world’s largest producer of palm oil, at 34 MT last season, or 54% of global supply, according to the US Department of Agriculture – although some effects of last year’s El Nino weather phenomenon, such as drought conditions in many areas, are still being felt.
Industry projections put crude palm oil (CPO) production for this year in the range of 33m-35 MT as output increases in the second half – the upper end of the forecast bracket puts CPO yields some 10% higher than last year.
According to revised data issued by the Indonesian Palm Oil Producers Association in late March, CPO production in 2016 rose by 10% to 32.5 MT, above earlier estimates of 30-32 MT.
The new sector data and forecast follow a marginal fall in export volume last year, though earnings actually rose due to a global production shortfall that lifted prices.
Last year Indonesia’s foreign sales from CPO rose by 8% to $17.8bn, despite a 2% dip in volume to 25.7m tonnes, according to the Indonesian Oil Palm Estate Fund. In dollar terms, this meant palm oil accounted for 13.8% of Indonesia’s non-oil exports that year.
(Written by Linda Silaen, Email: email@example.com)