Palm oil production in Indonesia is forecast to rise by 2.6% this year, according to the head of a government agency quoted by Reuters in a Nasdaq report.

Output in the country is expected to rise to 51.01M tonnes in 2022 compared to last year’s estimate of 49.71M tonnes, Eddy Abdurrachman, head of the Estate Crop Fund – a government agency in charge of collecting export taxes – was quoted as saying in the 28 December report.

Demand in 2022 for exports was seen rising to 27.9M tonnes, compared to an earlier forecast of 27.08M tonnes, he said, with domestic demand seen increasing to 11.4M tonnes next year, from an estimated 11.10M in 2021.

“We expect that in 2022, palm production will start to recover,” Abdurrachman said, who added that production had been disrupted by weather patterns like El Niño and La Niña in 2020 and 2021, contributing to rising prices last year.

The Estate Crop Fund provided three price forecasts for the edible oil, from US$747/tonne up to US$1,094/tonne.

Abdurrachman said the fund used the baseline forecast in the moderate price range of US$821/tonne to US$1,032/tonne.

Increased demand in economies recovering from the COVID-19 pandemic and higher cost of competitor oils had also affected prices, he said. However, the agency’s projection for 2022 was that prices would normalise, he added.

Rising prices have disrupted the fund's replanting programmes, aimed at replacing smallholder farmers’ old palm trees with new ones using better quality seeds, according to Abdurrachman.

Farmers had delayed applications to join the programme in order to sell fruit bunches at higher prices, he said, resulting in a drop in total new plantation area last year to 42,200ha, down from over 94,000ha in 2020.

Indonesia's domestic use of crude palm oil for biodiesel is expected to reach 10.15M kilolitres this year, up from earlier estimates of 9.4M kilolitres, according to the fund.