Indonesian palm oil output to rise

Indonesia’s palm oil production is estimated to rise by 7 to 9 percent in 2011, while global consumption will rise 5 percent annually over the next five years, the Indonesian Palm Oil Board said on Friday.

Maturing plantation areas combined with farmers using better harvesting techniques to cope with heavy rains is likely to see output in Indonesia, the world’s top palm oil producer, hit 22 million tons this year, Derom Bangun, vice chairman at the IPOB said.

“Although we had unusual weather last year, it seems that some companies had good production in January,” he said. “We [also] have new mature areas which were planted in 2006/2007.”

Benchmark May crude palm oil contract on the Bursa Malaysia Derivatives Exchange hit a near three-year high at 3,967 ringgit last week, on worries about the impact of rains on output, with demand still robust.

Prices have gained about 50 percent over the last six months, and analysts see further gains in the short term.

“Economically speaking, we notice that growth has already resumed, which would also trigger demand for vegetable oils,” said Bangun, who is also the founder and chairman of PT Kinar Lapiga, an oil palm plantation company.

“The main demand is for food — starting with cooking oil — from India and China,” he added.

Global palm oil production stood at about 45 million tons in 2010, with India buying about 8 million tons, China 7 million tons, and Europe 6 million tons.

“The better the living standards, the higher the consumption of vegetable oils — so this will increase in India and China as their economies grow,” said Bangun. He predicted global demand for palm oil in 2011 would rise to 47 million tons.

Closer to home, Indonesia has set the export tax for crude palm oil in February at 25 percent, versus 20 percent in January, as it seeks to ensure that domestic requirements are met in Southeast Asia’s biggest economy.