Palm Oil Industry Upbeat Over Policies

The Jakarta Globe | Sep 04, 2014

Jakarta. The Indonesian Palm Oil Association expects the country’s palm oil production to rise to 33 million metric tons next year on the back of favorable government policies.

“[Palm oil] production could increase significantly next year, to about 33 million tons as long as the weather stays normal,” executive director Fadhil Hasan said on Wednesday.

The association, known as Gapki, expects the total crude palm oil and palm kernel oil production to be between 27.5 million and 28 million tons, up 2.2 percent to 4 percent from last year.

“But such achievement also needs great support from the new government through conducive policies.”

Fadhil said the government needed to encourage the construction of biodiesel production facilities and infrastructure across the country in order to boost demand in the domestic market.

The government originally aimed for nationwide biodiesel production to reach 3 million kiloliters this year.

However, the association estimates that biodiesel production has only reached 800,000 kiloliters so far this year and expects to only reach one million kiloliters by year’s end.

The government has introduced a regulation requiring a blend of at least 10 percent of biofuel in diesel for commercial use.

However, the lack of supervision and incentives — or, viewed alternatively, the lack of credible enforcement — from the government means that few companies have developed biodiesel facilities, contributing to the dearth of production.

Fadhil added that the government had to come up with comprehensive and detailed spatial planning regarding the country’s production and conservation forests, so that palm oil companies could avoid unnecessary legal hurdles in the future.

Palm oil price stood at $798 per ton as of September this year, lower than palm oil companies’ expectations, Gapki said. Still, the association estimates that the price could be in the range of $800 to $850 per ton next year.

“There’s still demand for biofuel coming from Europe, the US and Malaysia. Demand for palm oil from Pakistan and Bangladesh is seen growing as well,” Fadhil said.

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