Indonesia Prepares for Sharp Palm Oil Production Losses Amid Looming El Nino

The Indonesian Palm Oil Producers Association (Gapki) has warned of potential sharp production losses due to the looming El Nino event. Gapki chairman Eddy Martono stated that a severe El Nino could reduce crude palm oil (CPO) output by up to five million tonnes, with the impact felt as early as next year.

Meanwhile, Indonesia is expanding its domestic use of palm oil as part of efforts to reduce diesel imports and achieve energy self-sufficiency. The rollout of a mandatory increase in palm-based biodiesel to 50% from 40% is expected to boost domestic CPO consumption for fuel.

Government officials expect national CPO output of around 53 million tonnes in 2026, but warn that El Nino could exacerbate the dry season and prolong its duration. Energy and Mineral Resources Minister Bahlil Lahadalia noted that the B50 implementation would provide market certainty while maintaining price stability.

However, Eddy Martono expressed concerns about predicting an increase in CPO prices due to El Nino and the B50 rollout, citing various factors such as developments in other vegetable oil markets. He stated that CPO prices are influenced by several factors, including sunflower, soybean, rapeseed, and canola oils.