Mumbai, 22 MAR (Commoditiescontrol): According to a report by the USDA Foreign Agricultural Service, Indonesia's palm oil production is expected to increase by 3% in the marketing year 2023-24 to reach 46 million tons. The rise in production is attributed to improved yields and assuming there are no adverse weather conditions.
The domestic consumption of palm oil is projected to increase by 5% to 19.90 million tons due to the rising demand in the food and industrial sectors, with biodiesel consumption predicted to increase by 900,000 tons.
Exports are also expected to rise marginally to 28.50 million tons in 2023-24 from 28.40 million in the previous year due to steady demand from India, China, and Pakistan. However, domestic supply is given greater priority, leading to a slight downgrade in exports for the current marketing year (2022-23).
The stock position at the end of the marketing year 2023-24 is calculated to be 3.547 million tons, lower than the previous year.
The main risk to palm production in Indonesia and Malaysia is the weather, particularly the development of El-Niño, which could lead to drier conditions and reduced yields.
On the upside, Indonesia's production is expected to reach 14.50 million hectares, assuming limited expansion and continued replanting efforts.
Total planted area is projected to be 16.70 million hectares for the marketing year 2023-24, with oil palm planted area nearing 17 million hectares by 2023 and 2024.
The rising demand for palm oil in Indonesia is primarily driven by the food and biodiesel sectors, making up 47% and 42% of domestic consumption, respectively, followed by oleochemicals at around 10%, according to GAPKI.
The USDA report cites the last El-Nino in 2015, which caused severe dryness, water deficits, longer periods of no rainfall, reduced fruit setting and flowering, and ultimately lowered palm oil output.
The weather models compiled by the Australian Bureau of Meteorology suggest that there is a 50% chance of sea surface temperature in the Pacific Ocean moving into El-Niño weather conditions from June, which could impact yields by reducing the oil extraction rate (OER) levels by 6 to 12 months lags depending on the severity of the impact.
In conclusion, Indonesia's palm oil industry is poised for moderate growth in the upcoming marketing year 2023-24, driven by improving yields and rising domestic consumption. However, the risk of adverse weather conditions, especially the potential impact of El-Niño, looms large over the industry, and any significant production shortfall could lead to immediate price hikes. With continued replanting efforts and limited expansion, the industry is expected to expand in the long run, but sustainability and environmental concerns continue to be major challenges for the industry.
(By Commoditiescontrol Bureau: 09820130172)
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