Indonesian Palm Oil Production Forecasted to Decline Amid Drought and Rising Fertilizer Costs

Indonesia's palm oil production is expected to decline by 3% year-on-year in 2027, according to Sunsirs. The projected decrease comes as a result of several factors, including El Niño-induced drought and rising fertilizer costs.

The drought has damaged palm inflorescences in major producing regions such as Sumatra and Kalimantan, resulting in an 8-10 month lag between stress and yield impact. Additionally, many plantations have reduced fertilizer application due to dry conditions, further suppressing yields.

Furthermore, Indonesia's domestic B50 biodiesel policy is diverting a large volume of palm oil to domestic consumption, tightening export supplies. Even a slight decline in total production could lead to a much sharper drop in exportable volume.