Increased Planting May Boost Indonesian Palm Oil Production by 8.5% in 2011

05/12/2010 (Jakarta Globe) - Indonesia’s palm oil output may grow by 1.8 million metric tons to 22.8 million tons in 2011 because of increased planting, Indonesian Palm Oil Board vice chairman Derom Bangun said in on Friday.

“World demand will be more than 2 million tons, maybe 3 million tons,” Bangun said in Bali. “From that point of view, I consider that supply through 2011 will be very tight.”

Palm oil output has been lower than usual this year because of heavy rainfalls caused by the La Nina weather event disrupting harvesting.

Global demand for edible oils will exceed supply for a third straight year, increasing by 4.5 million tons, as supply expands 3.5 million tons, said Dorab Mistry, director of Godrej International, on Sunday.

He predicted prices will reach 3,600 ringgit ($1,140) a ton this month.

Bangun said prices will remain at about that price until January, after which demand will be relaxed, sending prices about 10 percent lower by the end of the first quarter.

Prices will increase “significantly,” by as much as 10 percent by September, after the end of peak production season, assuming there is no fluctuation in fuel prices, he said.

Indonesia’s palm oil output this year is expected to be 21 million tons, a slight increase from 20.3 million tons in 2009, because of bad weather and because aging trees are overdue for replanting, Bangun said.

The industry has grown rapidly over the past few years but is facing rising criticism from environmental groups over deforestation and the annual slash and burn tactics which leaves large parts of Malaysia and Singapore blanketed in haze.

Palm oil, however, is a major export revenue earner for the country and palm oil companies have registered healthy profits. 

World Edible Oil Market

Eight EPPs to capture fast growing global demand for palm oil

Reports by IZWAN IDRIS, LOH FOON FONG, LESTER KONG, RACHAEL KAM, WONG PEK MEI, SHAUN HO and REENA NATHAN in The Star

MALAYSIA’S palm oil industry is the fourth largest contributor to the economy and currently accounts for RM1,889 (or 8%) of the gross national income (GNI) per capita. The industry spans the entire value chain from plantations to downstream activities.

Its development is mainly private-sector driven and is still heavily skewed towards upstream activities, namely production of fresh fruit bunches (FFB) in plantations, processing of FFBs in mills and palm kernel crushing and palm oil refining activities.

While Government support is primarily targeted at promoting downstream activities and supporting independent smallholders, the core focus of the Palm Oil National Key Economic Area (NKEA) is to reinforce the leading role of the private sector in steering the palm oil industry.

The aim is to raise the industry’s GNI contribution from the current RM52.7bil to RM178bil by 2020.

It plans to bridge this GNI gap through the implementation of eight core entry point (EPP) spanning across the palm oil value chain to capture the fast growing global demand for palm oil, which registered a growth rate of 10% between 2000 and 2009.

Five EPPs will focus on improving upstream productivity generating as incremental GNI of RM33.1bil in 2020. The implementation of these EPPs will transform Malaysia’s oil palm industry, resulting in significant productivity improvement from 21 to 26.2 tonnes per hectare per year.

These EPPs are accelerating the replanting of oil palm, improving FBB yield, improving worker productivity, increasing the oil extraction rate and developing biogas at the palm oil mills.

The other three EPPs are focused on downstream expansion that is targeted to generate an incremental GNI of RM14bil by 2020.

These initiatives will involve coordinating public-private R&D efforts with a strong commercialisation focus. Rising income from downstream products is expected to constitute at least 25% of total palm oil income.

These EPPs are developing oleo derivatives, commercialising second generation biofuels and expediting growth in food and health-based downstream segments.