Palm oil exports from Indonesia, the world's top producer of the tropical oil, are expected to decline in 2024, mainly due to rising domestic consumption following a lift in the biodiesel blending mandate, coupled with a slight drop in production, according to an industry official interviewed by Reuters on Thursday.
Reduced production will limit exports and could positively influence benchmark prices in Malaysia, another major palm oil market.
According to Fadhil Hasan, head of the trade and promotion division of the Indonesian Palm Oil Association (GAPKI), the country's exports could fall by 2 million tonnes to 30.2 million tonnes in 2024, compared to the previous year. The information was shared during the Globoil conference in Mumbai.
In the first half of 2024, exports have already fallen by 7.6% to 15.06 million tonnes, Hasan said. In addition, palm oil production is also expected to fall by 1 million tonnes to 53.8 million tonnes, as a result of the previous year's dry weather conditions, which negatively impacted productivity.
Drop in production and increase in palm oil consumption driven by biodiesel program
“There has been little improvement in productivity this year, in addition to no area expansion. Therefore, we expect a 1 million tonne drop in production,” Hasan said. In the first half of the year, production was 26.2 million tonnes, compared with 27.3 million in the same period in 2023, according to GAPKI.
Even if second-half production remains flat compared to last year, the annual total is likely to be lower than previously recorded, Hasan said.
Indonesia, meanwhile, has raised the palm oil blend in biodiesel to 35% in 2023. It will implement the measure nationwide from August 1. As a result, palm oil consumption is expected to reach 24.2 million tonnes in 2024, compared to 23.2 million tonnes last year.
Furthermore, the Indonesian Ministry of Energy plans to increase the blend to 40% in January 2025, aiming to reduce fossil fuel imports and carbon emissions.
This increase in domestic consumption is expected to reduce the surplus available for exports, which in turn will help the Indonesian government finance its biodiesel program, Hasan said. He also warned that “the government should carefully consider production and export trends before further increasing the blending mandate, as exports are a crucial source of revenue to sustain the biodiesel program.”
Source: Rajendra Jadhav | Notícias Agrícolas
