Plantation performance: IPOA predicts palm oil production only reaching 50 million tonnes

This article has been translated by PwC Indonesia as part of our Plantation News Highlights service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.

Bisnis Indonesia 

9 March 2023

By: Annisa K. Saumi

Mangupura - The Indonesian Palm Oil Association (IPOA) estimates that palm oil production this year will decrease to 50 million tonnes following the forecast of a long dry season and rising fertiliser price. 

Based on data from the Indonesian Palm Oil Association in 2022, the national production of oil palm products reached 51.2 million tonnes, consisting of crude palm oil (CPO) at 46.7 million tonnes and crude palm kernel oil (CPKO) at 4.5 million tonnes. 

IPOA Secretary General Eddy Martono mentioned several factors that may cause palm oil production in Indonesia to decline, including the potential for a long dry season, the smallholder oil palm rejuvenation programme that remained suboptimal, and the rising price of fertiliser. 

“In 2023, the potential for a long dry season that could reduce production must be anticipated,” he said between events during the IPOA National Conference in Badung Regency, Bali on Tuesday (7/3). 

According to him, the second factor that could reduce palm oil production is the suboptimal implementation of smallholder oil palm rejuvenation programme. He added that the rejuvenated smallholder oil palm area that has not increased contributes to the decline in the national production. 

In addition, he explained that the war between Ukraine and Russia resulted in high fertiliser price. This made smallholder farmers reduce fertiliser use, even not fertilising their oil palm plants at all. 

He affirmed that, at the same time, companies are reducing their fertiliser dose. This would lower productivity in 2023, especially once the dry season hits. 

“This must be voiced out because consumption will definitely increase with the implementation of B35 [35% biodiesel], while consumption for food and oleochemicals cannot be disrupted either,” he said. 

Eddy stated that the government can boost the rejuvenation programme through state-owned enterprises (SOEs). He reckoned that good coordination between the government and business actors is needed for the success of the rejuvenation programme. 

“If necessary, for example, the government could assign certain SOEs to open oil palm plantations in Papua, together with the local community,” he said. 

Eddy also stated that CPO export is facing challenges as the Indian government plans to increase import duty on crude palm oil and its derivative products. 

If the increase in the import duty is substantial, he reckoned it will result in higher CPO price in India. 

“Certainly, there will be disruptions, meaning their consumption of palm oil will decrease. Usually, they do that to protect their domestic affairs, for their own farmers too,” said Eddy. 

In the near future, he emphasised, India’s policy to increase import duty rates would not significantly affect Indonesia. He ensured that Indonesia’s CPO exports would remain safe in the near future. 

Furthermore, Eddy said the realisation of Indonesia’s palm oil exports in 2022 was 30.8 million tonnes, a decrease compared to 2021 at 33.6 million tonnes. He considers this decline in exports would not necessarily continue in 2023. 

He explained that CPO exports would not necessarily decrease because it would depend on the needs of Indonesia’s export destination countries. If a country’s CPO harvest declines and is lacking in quality, they will make imports, he added.

“Although the production in Indonesia and Malaysia might decrease, if the need increases due to insufficient supply of other vegetable oils, our exports can increase. So, if our consumption rises to 25 million tonnes, with a production of 50 million tonnes, there will remain some to export,” he said. 

Eddy stated that Indonesia must be careful if exports reach 30 million tonnes and domestic CPO consumption continues to rise. He stated that Indonesia’s CPO production could be insufficient. 

“This is why the smallholder oil palm rejuvenation is pushed to catch up on production. For example, if our production decreases, while consumption increases, then our exports this year could reach below 30 million tonnes,” said Eddy.

Oil palm processing 

From Jakarta, the Industry Ministry and the Oil Palm Plantation Fund Management Agency (BPDPKS) support the development of technology and human resources for palm oil mills. 

The Industry Ministry’s Director General of Agroindustry Putu Juli Ardika said the palm oil mill technology has not changed for 100 years and is accepted it as it is, with an emphasis only on producing fat. 

“Now conditions have changed, [oil palm processing] is not only for food but also for fuel of the future, whether for green biodiesel, green aviation fuel, green gasoline, which can be used directly to replace fossil fuel,” he said in a written statement on Wednesday (8/3). 

He stated that the Industry Ministry fully supports the development of oil palm processing technology. 

According to him, this includes revising the regulation on Export Proceeds. 

Efforts must be made to have this foreign exchange in Indonesia within a certain period so that it can be used for technology development, up to commercialisation. 

Another effort made by the Industry Ministry is to issue the Indonesian National Standard for CPO and palm cooking oil. 

He reckoned that a developing industry needs excellent human resources. The Industry Ministry has also issued the Indonesian National Work Competency Standards (SKKNI) for operators to managers in the crude palm oil, palm cooking oil, oleochemicals, and biodiesel industries. 

Educational institutions under the Industry Ministry have received the accreditation to become the SKKNI professional certification institutions. With the need for 1,000 people each year in oil palm processing, the Industry Ministry has also asked for BPDPKS scholarships for students at the Industry Ministry’s educational institutions. 

Jenny Elisabeth from the BPDPKS Research and Development Committee emphasised the importance of palm oil mills producing CPO that meets quality standards to maintain the competitiveness of the processed industry. 

“The increasing market demand for the quality of processed products must be anticipated by the palm oil mills by producing high-quality CPO. From the plantations, mills, to the transportation of CPO, they must be maintained,” she said at the Technology & Talent Palm Oil Mill (T-POM) Conference and Exhibition held by the Association of Indonesian Plantation Professional Practitioners (P3PI). 

P3PI Head of Palm Oil Mill Division Posma Sinurat stated that the T-POM activities provided a forum for palm oil mill practitioners to continuously update their technology and human resources capabilities to maintain the competitiveness of the palm oil industry. 

Gamal Nasir, former Director General of Plantation of the Agriculture Ministry, stated that the demand faced by the palm oil mills is getting tougher, especially related to the environment.

“T-POM provides an opportunity for palm oil mill practitioners to find out about palm oil mill technology and trends,” said Gamal.