Palm Oil Production Indonesia Fell 3% in 2016, Exports Down 5%

02.02.2017

The Indonesian Palm Oil Producers Association (Gapki) announced that Indonesia's palm oil production realization reached 34.5 million tons in 2016, down 3 percent from a production figure of 35.5 million tons in the preceding year. The reason why Indonesia's palm oil output fell in 2016 was the El Nino weather phenomenon that brought dry weather to Southeast Asia. The unconducive weather conditions plagued harvests in the region, although the 3 percent decline was much softer than earlier predictions. Earlier, several analysts predicted a 15-30 percent (y/y) decline of palm oil output in Indonesia in 2016.

Joko Supriyono, General Chairman of Gapki, explained that the impact of El Nino (which arrived in the region in 2015) was still felt in 2016. The 34.5 million tons of Indonesian palm oil that were produced in 2016 consisted of 31.5 million of crude palm oil (CPO) and 3 million tons of palm kernel oil (PKO).

Meanwhile, Indonesia's palm oil exports fell 5 percent (y/y) from 26.4 million tons in 2015 to 25.1 million tons in 2016 as demand in nearly all of Indonesia's key export destinations declined (with the exception of the United States and European Union), while an increasing amount of palm oil was consumed on the domestic market (for Indonesia's biodiesel program).

It is interesting to note that palm oil shipments from Indonesia to the USA rose by a whopping 43 percent (y/y) to 1.08 million tons in 2016. This sharp increase was attributed to a change in edible oil usage in the world's number one economy. The US Food and Drug Administration announced in mid-2015 that it would ban the use of (artificial) trans fat in food products. Until 2018 companies are given time to eliminate trans fat from their food products. This decision was based on research that shows the consumption of (artificial) trans fat is strongly linked to heart disease and obesity.

Meanwhile, palm oil exports of Indonesia in 2017 are targeted to reach 27 million tons.


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