The United States Department of Agriculture (USDA) has reduced its 2023/24 forecast for Indonesian palm oil production to 45.8M tonnes due to lower yields caused by El Niño-induced dryness.
The USDA Indonesia: Oilseeds and Products Update said rainfall from June-November 2023 in several Indonesian oil palm-producing areas was below average, with Riau and Central Kalimantan – the largest palm oil production areas – experiencing below average rainfall for four consecutive months during that period.
Moderate-level El Niño weather patterns will continue until February 2024, according to forecasts by the Indonesian local weather agency (BMKG).
However, as of early November, 20% of Indonesian area was expected to experience the onset of the rainy season, including Northern Sumatera, Riau, Southern Sumatera and most of West Sumatera, the USDA’s Foreign Agricultural Service 4 December report said.
According to BMKG forecasts, the rainy season onset will gradually phase out the impact of the prolonged drought triggered by El Niño.
The USDA also reduced its 2022/23 estimates for Indonesian palm oil use for the industrial sector to 11.6M tonnes for 2022/23 due to slower-than-expected consumption in the biodiesel industry.
According to the Indonesian biodiesel producer association (APROBI), biodiesel use totalled 8.8bn litres from January-September 2023, representing 67% of the government’s total allocation for the year.
The USDA said it expected biodiesel demand to continue to drive 2023/24 palm oil industrial use to 12.4M tonnes due to the expected growth of diesel use in the transportation sector and the government’s policy of maintaining a 35% blending rate.
Combined with expected food sector use of 6.9M tonnes, the USDA forecast domestic palm oil consumption in 2023/24 to increase by 5% to 19.6M tonnes.
“Based on several forecasts that Indonesia’s economy will grow modestly in 2024, we expect palm oil demand to continue to rise for both the food processing industry and households, mainly for cooking oil use,” the USDA said.
Based on final trade data, Indonesia’s 2022/23 palm oil exports totalled more than 28M tonnes, a significant 26% increase from the low point of 22.3M tonnes the previous year.
Combined higher demand from China, India and Pakistan boosted Indonesia’s palm oil exports in 2022/23 by 4.7M tonnes, due to a 33% price reduction compared to the previous marketing year.
Palm oil shipments to the USA totalled 1.6M tonnes in 2022/23.
China’s demand for palm oil in 2023/24 was expected to remain steady due to increased domestic vegetable oil supplies linked to higher oilseeds crushing.
Palm oil use in China’s food sector is mostly driven by instant noodle production, household use and the food service industry, according to the report.
Indian palm oil imports in 2023/24 were expected to increase due to the competitive price of palm oil compared to other edible oils.
