The United States Department of Agriculture (USDA) forecast Indonesia's palm oil production at 43 million tonnes in 2019/20, a 1.5 million tonne increase from 2018/19.
The rate of increase is expected to slow to 3.75 percent following two years of higher yields after the 2015/16 El-Nino, which caused a sharp decline in yields, USDA said.
The significant decline in crude palm oil (CPO) prices during the latter half of 2018/19 could result in lower yields as both large and smallholder plantations reduce fertilizer applications. Additionally, the lower prices are likely to reduce the total number of re-plantings as plantations look for ways to trim operating costs. Mature palm area is forecast to grow to 11.75 million ha in 2019/20.
Indonesia's palm oil exports are forecast to increase from 29 million tonnes in 2018/19 to 30 million tonnes in 2019/20, as increasing demand from China, Pakistan and Africa offset weakening exports to India, where duties for CPO and RPO remain 40 and 50 percent, respectively.
China’s increased demand for palm oil is in part compensating for a decline in soybean oil production, though a moderate recovery of the instant noodle sector reported since first half of 2018 also implies a boost for palm oil imports.
The low price for CPO in the early months of 2018/19 combined with the removal of the export levy since December 2018 have supported increased palm oil exports.
Trade data indicates shipments from October 2018 through January 2019 were 15 percent higher than the corresponding period in 2017/18. Based on revised regulation in early March 2019, the export levy is set at zero until the end of May 2019, and return to a price-based scheme thereafter.