Indonesia's palm oil exports 'to hit record' in 2017-18

02.08.2017

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, US officials said.

The US Department of Agriculture's Jakarta bureau hiked to 26.5m tonnes its forecast for palm oil exports in 2017-18, on an October-to-November basis, a figure 1.0m tonnes 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 25.96m tonnes 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 36.5m tonnes, 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, fuelling 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 2.20m tonnes, a rise of 22% year on year, if behind the 2.38m tonnes 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 $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.


Agrimoney

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