FACTORS DETERMINING

PERFORMANCE OF INDONESIAN
PALM OIL INDUSTRY IN 2024

M. Fadhil Hasan, Indonesian Palm Oil Association-Asian Agri Group

Kuala Lumpur, March 6th, 2024

Outlines

1 Performance of Indonesia Palm Oil Industry in 2023

Supply Side
Demand Side
Price

Outlook in 2024: Supply Side

El-Nino factors
2 Replanting program
Expansion areas
Productivity improvement

3 Outlook in 2024: Demand Side

Export markets
Domestic consumption
Price outlook

4 Conclusions
2
 Performance of Indonesian Palm Oil Industry In 2023

2022 2023 E 2024 P

Performance in
2023 and 2024 OPENING STOCK 4,129 3,691 4,457

Outlook
TOTAL PRODOCTION 51,248 53,199 54,400

Production is
managed to increase DOMESTIC CONSUMPTION
slightly. Domestic - -
FOOD 9,892 9,391 10,254
consumption
continues to increase OLEOCHEMICALS 2,200 2,179 2,250
but export declines BIODIESEL 9,048 10,615 11,600
due to unsatisfactory
production TOTAL DOMESTIC
performance and 21,140 22,185 24,104
CONSUMPTION
weak demand. - -
EXPORTS

TOTAL EXPORTS 30,804 30,248 29,500

8
ENDING STOCKS 3,691 4,457 5,253 3
Development of
Price In 2023 (CIF,
Domestic KPB,
and FFB)

Price of CPO in
domestic markets
follow the international
price yet with wider
margin on account of
the levy and an
increased in the
logistical costs.

8
4
Production and
Exports in 2023

thousand tonnes
Monthly production in 2023
relatively stable ranges
from 4,2 million tonnes to
5,0 million tonnes.
The pattern of production
has changed in the last
three years where the peak
season shifted from
August-September to the
earlier months.

5
The Key Issue is the Outlook for Relative Yields

Rapeseed, soybean and sunflower oil yield per In terms of relative yields, the oil
hectare relative to palm oil
palm’s performance has been
very weak.
12
Where palm oil once yielded 4
SEA palm oil yield against oilseed oil yield

10
times as much oil per hectare as
8
US soybeans, today it is only
double. A similar decline
6 occurred against EU rapeseed
4
oil and Russian sunflower oil.
The major concern for the oil
2
palm is not it’s structurally higher
0 labour requirement, but it’s poor
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
yield performance.
EU Rapeseed US Soybean Russian Sunflowerseed

Source: Dr Julian Conway McGill

6
 FFB Productivity Shows Downtrend

FFB yield
productivity from
Nucleus Plantation
declining.

This in line with the

national CPO yield
productivity trend.

10

Source : Public Company Report (2023)

7
Yield 25,00 12.000

Performance
Declining, 20,00
10.000

Cost
8.000
Increasing 15,00

6.000

10,00
4.000

5,00
2.000

- 0

Avg Yield Avg Cost Linear (Avg Yield)

Source: GAPKI (2022), processed

8
Monthly 4.000

Export in 2023 3.500

thousand tons
3.000

2.500

Monthly export 2.000

relies on production, 1.500

economic condition,
1.000
price and stock.
500
The pattern of
monthly export does -

not follow the Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23
- Oleochemical 376 358 414 364 377 357 401 416 333 406 430 406
pattern of - Biodiesel 40 64 92 24 8 13 5 7 21 5 7 22
production. - Refined CPKO 98 93 149 95 75 88 119 78 130 113 63 141
- CPKO 8 6 5 0 0 1 2 1 8 1 1 7
- Refined CPO 2.121 2.254 1.880 1.586 1.632 2.487 2.403 1.254 1.968 2.212 1.247 1.683
- CPO 303 137 102 65 138 504 589 317 233 264 418 192
Total Export 2.946 2.912 2.641 2.134 2.230 3.450 3.519 2.073 2.693 3.001 2.165 2.451
% to production 69% 69% 55% 47% 44% 78% 74% 49% 59% 61% 46% 56%

9
 Export by product types

Palm Oil Export

. by Product
Types

1. Exports mostly in
processed forms
indicating that
development of palm oil
downstream industries
relatively work with the
existing policy.
2. Ratio exports/production
tends to decrease.
3. Growth in consumption is
greater than that of
production

10
Growth of Palm
Oil Export to
Major
Destination
Countries
2022 vs 2021
1. Increased in India,
Pakistan, Bangladesh
2. Decreased in China & EU
2023 vs 2022
1. Increased in China, India,
Africa, USA and
Bangladesh.
2. Decreased in EU,
Pakistan, Russia and
Malaysia

11
2023 Export
Value by
Destination

1. Destination : 169
countries
2. Total value: 30,32
billions USD
3. 16 countries value 1-2
million USD each, with
total 29 million USD
4. 51 countries value 0-1
million USD with total
1,3 million USD

12
Palm Oil
Domestic
Consumption

The jumps in biodiesel

consumption in 2022 is due
to biofuel mandatory
changes from 30% to 35%.
Consumption as food
increase steadily but
disturbed by Covid-19.
Consumption as
oleochemicals increases
steeply due to Covid-19.
9.391
2.179
10.615
22.185
13
 2.500
Monthly
48.6%44.1%40.4%
Domestic 2.000 39.6%42.0%
38.9%44.3%40.2% 43.8%44.4%
41.9%42.4%
Consumption
in 2023

THOUSAND TONS
1.500

Domestic consumption
1.000
accounts for about 40%-
50% of the total production.
Monthly biofuel 500
consumption exceeds food
consumption after July 2023
-
after government Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec-
announced an increase in 23 23 23 23 23 23 23 23 23 23 23 23
blending policy. Food 793 802 911 919 923 880 853 898 865 835 806 812
Oleochemical 183 185 187 201 198 190 185 183 190 186 188 192
Biodiesel 810 816 788 776 854 890 879 970 948 978 947 991
Total Consumption 1.78 1.80 1.88 1.89 1.97 1.96 1.91 2.05 2.00 1.99 1.94 1.99

14
Growth of
Production Lower
than Growth of
Consumption: The
Need to Increase
Production
Growth of consumption driven
by economic growth, an
increased in population and
mandatory blending program.

Growth of production
constrained by various policy in
production such as moratorium
and stagnant in productivity.

53,199
22,185

15
Policy on Levy
and Export Tax
and its impact
on productivity
When price are high
industry have the
opportunity to invest in
research and development
to increase productivity.
However, this opportunity
missed because of the high
levy and export tax.
The need to review the levy
and export tax.

16
 Outlook in 2024: Supply Side Factors

1. Climate change; El Niño and dry weather events. It turned out the El-Nino in
2023 was very mild El-Nino. It only affected small areas especially in the
southern part of Sumatera and Java (which is not the main planting areas of oil
palm).Thus, impact of El-Nino on palm oil production is insignificant.
2. Slow replanting program. Replanting program continues to be critical but the
achievement is not satisfactory. The realization of the replanting program is
always lower than its target. Nevertheless, some replanted areas starts to
harvest in 2021 on ward.
3. Expansion areas. Moratorium now is enforced permanently. However, expansion
areas especially in the smallholder continues. During the period of 2017-2020
areas of oil palm plantation increase by 540 thousands hectares which is now
started to harvest.
4. Productivity improvement. Trend in productivity is still stagnant but with the
replanting program, it is expected productivity will increase slightly.
5. Increasing cost of production. Cost of production continues to increase along with
higher fertilizer prices and labor costs.
17
 Outlook in 2024: Demand Side

1. Lower economic growth in some major palm oil importing countries; India,
China, EU, USA and Pakistan. Lower economic growth means decline in
demand for palm oil.
2. Trade restrictions imposed by importing countries especially in EU (subsidy,
dumping, trade regulations).
3. EUDR EU imposes due diligence for seven commodities claimed as main
caused of deforestation including palm oil through verification and traceability
system.
4. Inconsistency of tariff in importing countries.
5. High level of export tax and levies which caused competitiveness of the industry.
6. There is possibility of increasing mandatory blending of mandatory biofuel from
B-35 to B40 in the second semester of 2024.
18
 Economic Growth in Major Palm Oil Importing
Countries
12,0 GDP Growth 2016-2024F* (%)

10,0
Major palm oil
importing countries 8,0
experiences lower
economic growth in 6,0
2024.These countries
include China, India, Percent (%) 4,0

USA and EU. 2,0

This will affect
demand for palm oil 0,0
2016 2017 2018 2019 2020 2021 2022 2023F* 2024F*
products as there is
-2,0
considerable
correlation between -4,0
economic growth with *World Economy Outlook January 2024
demand for palm oil. -6,0

-8,0
China India United States Pakistan European Union
19
 Vegetable Oil Price Comparison 2016-2024 (January)

Vegetable Oil Price Comparison 2016-Jan2024 (USD/TON)

2200
Vegetable oil prices showed
a declining trend in the 2000
second half of the 2023 1800
including palm oil but
1600
recovered in the beginning of

Price (USD/Ton)
2024. 1400

We project that price will 1200

increase slightly due the 1000
seasonal factor. However, in
800
the second semester it is
expected that price will be 600
declined on the account of 400
main harvest season
200
assuming there is no change
in mandatory biofuel 0
2016 2017 2018 2019 2020 2021 2022 2023 2024
program.
Palm Oil Rott.CIF Soybean Oil Rapeseed Oil Price Sunflower Oil Price

20
 Outlook in 2024: Summary

2023 2024 EXPLANATIONS

Production (Million Tonnes) • No significant impact of El

Nino
53,2 54, 4 • Newly harvested areas

Domestic Consumption
22,2 24,1 With the assumption of B35
(Million Tonnes)

Exports (Million Tonnes) 32,2 29,5 Demand uncertainty

Average Prices of CPO

960 900-1000
(US$/Tonnes)
21
 Conclusion

• Production of palm oil in 2023 increased considerably compared with 2022after

stagnant in the last three years. In 2024 production will continue to increase
slightly on the account of an expansion areas in 2017-2020 and replanting
program which started to harvest.
• On the supply side, there are several factors affecting performance of palm oil
production namely, El Nino, expansion areas, replanting program, productivity
improvement and increasing cost of production.
• On the demand side, performance of palm oil industry determined by lower
economic growth in major palm oil importing countries, trade restrictions,
mandatory blending of biofuel program and high level of levy and export tax.
Export will be lower and domestic consumption will be higher than that of 2023.
• Price will slightly increase in the first semester, and assuming there is no
change in mandatory biofuel program, price will decline in the second
semester. Overall, average price of palm oil in 2024 will be higher than in 2023.

22
 THANK YOU

Indonesian Palm Oil Association (GAPKI)

Sudirman Park Rukan Blok B-18 • Jl. K.H. Mas Mansyur Kav. 35, Karet Tengsin,
Jakarta Pusat 10220Tel. +62 21 57943871 • Fax. +62 21 57943872 • Email :
gapki@gapki.or.id