Indonesian palm oil: Rising stocks, dropping prices

By Annie-Rose Harrison-Dunn

- Last updated on GMT

What price repercussions will increased palm oil production have?
What price repercussions will increased palm oil production have?

Related tags: Palm oil

Record palm oil stocks from Indonesia, the world’s biggest producer, could mean a price drop for the food ingredient.

Data from the US Department of Argiculture (USDA) predicted that Indonesian stockpiles of the most-used oil from crops will rise 66% to 3 million metric tons by the end of 2013/14.

Dorab Mistry, a director at Godrej International Ltd. and trader of oils for three decades, told Bloomberg that futures could drop by up to 13% to 2,000 ringgit (€460) per ton by January, marking the lowest prices since 2009.

USDA predicts increased exports

In a 2012/13 trade outlook the USDA Foreign Agricultural Service said that Indonesia’s palm oil exports were up 200,000 tons to 20.3 million based on strong year-to-date shipments.

By the authority’s 2013/14 statement it said Indonesia’s palm oil exports would be up 300,000 tons to 21.3 million due to expectations of stronger demand.

In a separate USDA gains report published earlier this year it was said that increased productivity and plantation area expansion remained the key drivers of higher Indonesian crude palm oil (CPO) production.

“Annual average Indonesian CPO yields have grown by approximately three percent over the past 10 years. Planted area has also increased over the past nine years, and Post expects that oil palm planted area will continue to expand throughout 2013 and 2014,”​ it said.

On the receiving end

Anglo-Dutch food giant and palm oil user Unilever declined to comment on how the commodity fluctuation might affect it but told FoodNavigator: “We buy around 1.5 million tonnes [of palm oil] every year, or about 3% of global production. The majority of plantations where our palm oil is sourced from are in Malaysia and Indonesia - roughly 70% of total – the rest from Africa and Latin America.”

Rising consumption

According to Greenpeace, which campaigns for sustainable production of palm oil: “Our consumption of palm oil is rocketing: compared to levels in 2000, demand is predicted to more than double by 2030 and to triple by 2050.”

“Over 70 per cent ends up in food, but the biofuels industry is expanding rapidly. Indonesia already has 6 million hectares of oil palm plantations, but has plans for another 4 million by 2015 dedicated to biofuel production alone,”​ it added.  

Related topics: Market Trends, Fats & oils

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