Will 2018 Be a Good Year for Indonesia's Palm Oil Industry?
Although the crude palm oil price remains under pressure at the start of 2018 (as palm oil stocks touched their highest level in over two years last December), prospects for the crude palm oil industry seem positive in 2018. Meanwhile, 2017 can be labeled the year of recovery for stakeholders in the palm oil industry after having been plagued by El Nino-related weather trouble in the preceding year.
The Indonesian Palm Oil Producers Association (Gapki) stated that Indonesia's crude palm oil (CPO) production reached 38.17 million tons in 2017, while the production of palm kernel oil (PKO) reached 3.05 million tons. Total palm oil production of Indonesia stood at 41.98 million tons in full-year 2017, up 18 percent year-on-year (y/y).
Meanwhile, Indonesian CPO exports jumped 26 percent (y/y) to USD $22.97 billion in 2017, reportedly the highest amount of CPO exports ever recorded by Indonesia.
Togar Sitanggang, Secretary General of Gapki, said he is optimistic that the recovery will continue into 2018 as the global economy is strengthening. However, he added that there are several challenges lurking about that undermine growth of the country's palm oil industry. For example, the anti-palm oil campaigns in several nations, including the European Union (EU) and the United States. While the USA imposed heavy anti-dumping duties on biodiesel shipments from Indonesia, the EU plans a complete stop to biodiesel consumption per 2021.
Meanwhile, India recently raised import tariffs for Indonesian CPO. Analysts say that this has a bigger impact on Indonesia than the biodiesel policies of the USA or the EU (India is the world's biggest palm oil importer).
The price of palm oil is expected to remain under pressure because output in the world's two biggest palm oil growers - Indonesia and Malaysia - has grown on the back of improved weather conditions. This year's palm oil output in Indonesia is expected to remain stable.
Key points:
• In 2018 the palm oil industry is expected to remain as strong as in 2017 due to the strengthening world economy and positive weather conditions
• The palm oil price will, however, remain under pressure on rising palm oil output
• Major challenges for the palm oil industry (and related industries such as the biodiesel industry) are negative policies in several countries/regions
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