Indonesia's 2015 palm output growth to slow after drought: industry

[JAKARTA] Indonesian output of palm oil will grow by just over 3 per cent in 2015, less than half the 7 per cent growth rate this year, a leading industry association said on Tuesday, after prolonged drought in the main growing region of Sumatra.

Output in the world's top producer of the tropical oil will be 31.5 million tonnes next year, up from 30.5 million tonnes in 2014 and 28.5 million tonnes in 2013, said Fadhil Hasan, executive director at the Indonesian Palm Oil Association. "The weather this year will be a factor," said Hasan, adding there was a prolonged dry spell on the island of Sumatra, which ended with the arrival of seasonal rains two weeks ago.

Despite reports of a continuing dry spell in the Kalimantan region, Hasan said he had returned from there last month and that it had already begun raining then.

Indonesia's crude palm oil (CPO) exports will be flat at around 19 million tonnes next year, said Hasan, adding that higher domestic biodiesel usage and rising demand from Pakistan would help offset the negative impact if top buyer India decides to bring in an import tax.

Indonesian CPO exports to Pakistan have jumped from about 200,000 tonnes in 2011 to 1.2 million tonnes from January to September this year after the two countries agreed a Preferential Trade Agreement in September 2013, Hasan said.

Indonesia introduced a regulation in August 2013 aimed at boosting the use of palm-based biodiesel and Hasan estimated that biodiesel demand would total 1.6 million tonnes this year. He was unable to give a forecast for 2015.

Palm prices dropped to their lowest in more than five years in September at 1,914 ringgit (US$572) per tonne but have since recovered to about 2,240 ringgit (US$669). Hasan forecast an average price of around US$725-US$730 per tonne for the remainder of 2014.

To help Indonesia's palm sector, President Joko Widodo should scrap a government forest-clearing moratorium, boost infrastructure investment, avoid making major changes to foreign ownership rules for plantations and cap the country's CPO export tax at between 5 percent and 7.5 per cent, Hasan said.

Major palm oil firms operating in Indonesia include PT Sinar Mas Agro Resources and Technology, Malaysia's Sime Darby and Singapore-based Wilmar International Ltd .

REUTERS