Indonesia CPO Output Growth to Slow on Rains

JAKARTA: Crude palm oil (CPO) output from Indonesia, the world’s largest producer, may grow at a slower pace of 4.5-5 per cent this year as prolonged rains have affected yields, the country’s palm oil association said on Friday. Lower output from Indonesia could offer support to palm oil prices, which have gained 1.5 per cent so far this year, but hurt revenues for producers such as Astra Agro Lestari and Wilmar. “On average every year production grows about 10 per cent, but for this year I don’t think so because production may be disturbed by extreme weather,” said Fadhil Hasan, executive director of the Indonesian Palm Oil Association (GAPKI). “Last year’s production growth was 7.5 per cent from the previous year, for this year I think the growth may be less than that, it could be around 4.5-5 per cent only,” he said.

Wilmar, the world’s biggest listed palm oil firm that has plantations in Indonesia, on Friday posted its first quarterly earnings decline in four years, joining other commodity firms whose margins have been squeezed by tight edible oil supply. A bitter dispute between the palm oil industry and environmentalists may also slow the aggressive expansion of plantation firms. Indonesia had earlier aimed to produce 22.5 million tonnes of CPO this year, from 20.6 million tonnes in 2009, Hasan said. Indonesia’s meteorology agency (BMKG) in its latest forecast this week said rains will continue until the end of this year because of the La Nina weather anomaly, including in the commodity growing areas of Sumatra, Kalimantan and Sulawesi. – Reuters

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