Indonesia’s palm oil production forecast to reach 38.5 million tons in 2017/18

Favourable growing conditions and reports of higher production throughout the sector is expected to boost Indonesia’s palm oil production to 38.5 million tons in 2017/18, and 2016/17 output is revised up to 36 million tons, the U.S. Department of Agriculture (USDA) said in a report.

Buoyed by larger domestic availability, palm oil exports in 2017/18 are also revised upwards, it added. The USDA said it was also revising 2016/17 production to 36 million tons, thanks to optimal growing conditions.

“Favourable weather conditions fuelled growth in palm oil production following the dry weather in 2015/16. Both publicly listed plantation companies and industry associations reported strong growth in FFB production during first nine months of 2017,” it said.

With expectations for continued good growing conditions and average to above average precipitation over the next 12 months, production is forecast to reach 38.5 million tons in 2017/18, the report added.

Weather agencies report an increasing possibility of a weak La Nina in the region. A typical La Nina event would bring higher rainfall. The Indonesia weather agency (BMKG) forecasts peak rainfall to occur between December 2017 and February 2018. As of November, the rainy season had already started in more than half of the region, according to BMKG.

The USDA said that due to the strong pace of sales in 2017 and expectations for plentiful supplies and competitive prices through 2018, palm oil exports for 2016/17 and 2017/18 were revised up to 27.5 and 28 million tons, respectively.

“Between January and September 2017, exports reached 21.7 million tons, a 36 percent increase compared to 2016. The decline in palm oil prices of about 11 percent, and the widening spread with soybean oil prices, $63 in January to $158 in September, supported this rapid pace,” it said.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He also advises companies on thought leadership imperatives.

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