Global crude palm oil (CPO) prices may climb up to USD $800 per metric ton in 2016, from USD $575 per ton (FOB) currently, due to the looming implementation of the B20 biodiesel program in Indonesia and curbed CPO output in 2016. Moreover, global oil prices are expected to rise to around USD $60 per barrel in 2016. Higher petroleum prices should boost demand for biodiesel (diesel blended with palm methyl ester, which is subsidized through the Indonesian government's CPO fund program).

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The El Nino-inflicted dry weather in Indonesia and Malaysia, possibly the worst in nearly two decades, is expected to curtail crude palm oil (CPO) output in both countries, implying that palm oil prices can extend their rally into next year. Moreover, Indonesia will consume more CPO as the government will raise the mandatory amount of palm oil blended with diesel from 15 to 20 percent (part of its B20 biofuel program) in early 2016. Since August - when prices were at a six-year low - palm oil futures have surged 26 percent.

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Production of crude palm oil (CPO) in Indonesia is estimated to rise to 33 million tons in 2016, roughly 500,000 tons lower than the initial forecast as the El Nino weather phenomenon is expected to impact on agricultural output by causing an extended dry season in Southeast Asia (that will perhaps last beyond December). This year, Indonesia, the global leading CPO producer and exporter, is expected to produce 31.5 million tons. Reduced output in Indonesia may support palm oil prices.

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Indonesia's export tax on crude palm oil (CPO) shipments will remain at zero percent in October 2015 as the government's reference CPO price fell 13 percent (month-on-month) to USD $529.51 per metric ton for October. When this reference CPO price is below the USD $750 per ton threshold, then the government scraps the export tax in an attempt to make shipments more attractive. However, exporters are still subject to the recently introduced palm oil exports levy. When the export tax is cut to zero percent, exporters are required to pay a USD $50 per ton levy for CPO and USD $30 for processed palm oil products shipments (part of these funds are channeled to Indonesia's biodiesel subsidy program).

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There is limited to no room for palm oil prices to rise in the remainder of 2015 as crude palm oil (CPO) reserves have climbed while exports are down. CPO production in Indonesia, the world’s largest producer and exporter of this commodity, may have hit the one-year high of 3.20 million tons in August (from 2.86 million tons one month earlier) as trees reached their peak production period. Meanwhile, India introduced higher taxes for overseas purchases of palm oil in order to protect domestic growers.

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Indonesia’s production of crude palm oil (CPO) is expected to reach 40 million tons in 2020, in line with the government’s national program and downstream CPO roadmap. At the 3rd Indonesia International Palm Oil Processing Machinery & Technology Exhibition, Pranata, Director of Forest and Plantation Industries at the Indonesian Industry Ministry, said that, based on the roadmap, targeted CPO production growth should average 6.8 percent per year up to 2020, so the country will produce 40 million tons by that year.

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After introducing palm oil export levies earlier this month, the Indonesian Finance Ministry announced on Tuesday (28/07) that it has implemented another change in the country’s palm oil industry. From now on, export taxes for crude palm oil (CPO) and other palm oil products will be expressed in US dollar instead of a percentage of the price. Indonesia’s palm oil export tax kicks in when the government’s reference CPO price exceeds USD $750 per metric ton. If the price is below this level, palm oil exporters only need to pay the new export levies.

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Indonesian government officials announced that the recently-unveiled palm oil export levies will be imposed starting from Thursday (16/07). The new rules require that a USD $50 per metric ton levy is imposed on crude palm oil (CPO) exports, and a USD $30 per metric ton levy is imposed on exports of processed palm oil products. These palm oil export levies only need to be paid by exporters when the government’s reference CPO price falls below USD $750 per metric ton, effectively cutting the palm oil export tax to zero.

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Uncertainty remains about the timing of the implementation of Indonesia's new palm oil export levies. In May 2015 Indonesian President Joko Widodo signed a new regulation stipulating that a USD $50 (per metric ton) levy is to be imposed on crude palm oil (CPO) exports, and a USD $30 (per metric ton) levy on processed palm oil product exports. Proceeds from these export levies will be used to fund the Indonesian government’s biodiesel (subsidy) program. However, implementation of the new regulation has been delayed several times.

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Indonesia’s new palm oil export levy is to be implemented in late May 2015. Rida Mulyana, Director General of Renewable Energy at Indonesia’s Ministry of Energy & Mineral Resources, stated that President Joko Widodo signed the regulation last night (05/05). The new levy means that a USD $50 (per metric ton) levy is to be imposed on crude palm oil (CPO) exports, and a USD $30 (per metric ton) levy on processed palm oil product exports. Proceeds from these export levies will be used to fund the government’s biodiesel (subsidy) program.

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The world's two largest crude palm oil (CPO) producers and exporters - Indonesia and Malaysia - signed an agreement on Saturday (21/11) for the establishment of an intergovernmental palm oil council, called the Council of Palm Oil Producer Countries (CPOPC), that aims to control the global CPO supply, stabilize prices, promote sustainable practices in the palm oil industry, and enhance the welfare of oil palm smallholders. Both countries will invest USD $5 million each for the set up of this new council. Its headquarters will be located in Jakarta.

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Indonesia and Malaysia, the world's leading crude palm oil (CPO) producers and exporters, will cooperate for the development of a special economic zone on Indonesian territory to boost the palm oil industry's downstream industry. Private companies will be given incentives to invest in this zone and develop industries to process CPO into olein, a key ingredient for the production of cosmetics and margarine. Furthermore, both countries plan to establish the Council of Palm Oil Producer Countries.

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Crude palm oil (CPO) output in Indonesia, the world’s largest CPO producer and exporter, may decline by 20 percent to 27.5 million tons in 2016 due to the negative impact of the El Nino weather phenomenon. On a positive note, declining CPO output in Indonesia could provide some support for benchmark Malaysian palm prices that fell to a 6.5-year low of 1,836 ringgit last week.

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Malaysia, the world’s second-largest crude palm oil (CPO) producer and exporter, will continue its duty-free export tariff for CPO in January 2015 according to information from the Malaysian customs department. Starting from September 2014 Malaysian authorities have implemented a duty-free CPO export policy in an effort to boost global demand and support international CPO prices (which have fallen nearly 20 percent this year). Indonesia, which has seen duty-free CPO shipments since October 2014, is expected to follow suit.

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Reserves of crude palm oil (CPO) in Indonesia may have declined for a second straight month in October on the back of drought and an increase in exports from Southeast Asia’s largest economy. The delayed impact of drought (which even managed to dry up several rivers in West Kalimantan in October) limited production of CPO in recent weeks. Meanwhile, exports have increased after Indonesia and Malaysia - the world’s two top palm oil producers - scrapped export taxes to boost demand for this commodity.

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Indonesia has the potential to become a global force in the biodiesel industry because of the country’s position as the world’s top producer of crude palm oil (CPO). In 2014, Indonesia’s CPO production is estimated to total 30 million tons. Traditionally, Indonesia exports about 75 percent of its total CPO production, particularly to the giant economies of China and India. As such, this commodity is one of Indonesia's most important foreign exchange earners, apart from coal, in the non-oil and gas sector.

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The Indonesian government is considering to stop exports of crude palm oil (CPO) to Europe from 2014 onwards as domestic CPO demand in Southeast Asia's largest economy is rising, brought on by the country's biofuel industry which is expected to grow 70 percent next year to 5 million tons. To curtail oil imports, the government stimulates the production of crude palm oil-based biofuel by raising the mandatory content of fatty acid methyl ester (which is made from palm oil) in biodiesel products from 7.5 percent to 10 percent.

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The recovery in global palm oil prices that seemed to have started last spring, has ended. A few months ago, optimism had colored expectations of many analysts as palm oil prices went up about 10 percent between early May and mid-June, after tumbling 30 percent in 2012 (causing that palm oil was one of the worst performing commodities in terms of price growth last year). However, the palm oil price increase earlier this year was merely the result of falling production rates in Indonesia and Malaysia, the world's largest palm oil producers.

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The price of crude palm oil (CPO), which has been under downward pressure for a long time as global turmoil lingers on, started to rebound due to falling stockpiles in Indonesia and Malaysia. Reserves of the commodity fell because of weather conditions and because of an increase in demand ahead of the Islamic fasting month (Ramadhan). The price of crude palm oil is expected to hit the USD $900 per ton mark in late 2013, up from USD $828-865 per ton in May and June. This price recovery is expected to continue.

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Shareholders of Astra Agro Lestari, Indonesia's largest agribusiness company by value (which is particularly engaged in palm oil and rubber plantations), agreed to distribute IDR 1.08 trillion (USD $111 million) in dividends to its shareholders. The allocated amount is equivalent to about 45 percent of the company's net profit in 2012. Dividend per share is set at IDR 685 (USD $0.071). Last November, the company had already paid interim dividend of IDR 230 per share. Final dividend will be paid on 3 June 2013.

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