The United States Department of Agriculture (USDA) has reduced its 2022/23 forecast for Indonesian palm oil production to 44.7M tonnes due to larger than expected production losses following the country’s palm oil export ban.
Continued lower fertiliser application rates also affected production, the USDA’s Foreign Agricultural Network (FAS) 6 December report said, while flooding in Kalimantan from August-September also disrupted logistics and delayed harvesting.
The USDA also updated its forecast for Indonesia’s palm oil production in 2021/22 to 43.2M tonnes in its Oilseeds and Products Update.
Indonesian palm oil consumption in 2022/23 was increased to 10.5M tonnes and to 10M tonnes in 2021/22 due to higher biodiesel production demand in overseas markets.
Narrower price differences between palm oil diesel and fossil diesel prices had stimulated discretionary blending in several export markets in 2022, the USDA said. The Indonesian government’s extension of its export levy waiver from mid-July 2022 to late December 2022 had also led to a sustained increase in industrial demand.
At the time of the report, the government’s B40 adoption plan was in the road-test phase and was expected to conclude in December 2022, with the publication of a technical report, the report said.
As biodiesel allocations for each year had to be publicised officially by the end of December the previous year, the USDA said the technical report was not expected to be published in time for B40 allocations to be set for 2023, which meant that B40 implementation was not likely to begin until 2024 at the earliest.
The USDA maintained its forecast for food sector palm oil consumption in 2022/23 at 6.7M tonnes, a slight increase from 6.5M tonnes the previous year.
Indonesian palm oil consumption was forecast at 17.51M tonnes in 2022/23, a 4% increase from 16.8M tonnes in 2020/21.
Palm oil exports from the country in 2022/21 totalled 22.3M tonnes, a significant 17% drop compared to the previous year due to policies in 2022 either restricting or banning exports of palm oil products, the report said.
The USDA said it expected Indonesian palm oil exports to increase to 29M tonnes in 2022/23 due to stronger demand from key markets and price competitiveness with other vegetables oils.
The Indonesian government had extended its suspension of the export levy to December 2022 in a bid to increase exports and reduce surging stocks caused by export ban-related backlogs, the report said.
Palm oil demand from the People’s Republic of China (PRC) in 2022/23 was expected to recover due to palm oil’s price competitiveness compared to other vegetable oils. For example, feed millers in the PRC were expected to cut back on the use of soyabean oil and switch to using more palm oil due to high soyabean oil prices.
In the PRC’s food sector, the USDA said palm oil users typically blended palm oil with other vegetable oils to cut costs.
Palm oil exports to India were expected to recover in 2022/23, the report said, despite reduced shipments in the previous year due to higher export levies and export restrictions.
Based on India’s economic performance and palm oil’s competitive price, palm oil was expected to be the primary edible oil consumed in the country, with the hotel restaurant and catering (HORECA) industry a leading consumer category.
