Indonesia to pip Malaysia as top palm oil producer

Surpassing Malaysia, Indonesia is likely to emerge as a number one palm oil producer in 3 to 4 years, industry experts said.

"Indonesia is seeing a 6 per cent on-year rise in acreage under oil palm plantations and about 8 per cent rise in palm oil output. Thus, it will not take more than 3-4 years for it to emerge as a top palm oil producer," Derom Bangun, chairman of Indonesian Palm Producers Association, said.

Earlier at GLOBOIL 2005, James Fry, managing director of London-based LMC International, however, was more optimistic than Bangun. He said, "It would take not more than 3 years for Indonesia to surpass Malaysian output."

Indonesian CPO prices are about $10-12 a tonne lower than the Malaysian prices largely due to port congestion and poor promotion of the sector, said Bangun. "However, we are now working towards it. But we are fighting a lack of enough capital in the sector development."

Another issue of concerns is the high content""about 4-5 per cent""of food fatty acid.

Indonesia has enough land, apart from the area under forest, to go in for further expansion of oil palm plantations and this will help it grow in the sector and compete with Malaysia. The industry is also working towards increasing the yield, mature oil palm area and oil extraction ratios.

Other steps required will be organising promotion events such as roadshows. "GAPKI was planning roadshows in China and Russia in a bid to find more customers. We already have secured minimal success in China where refineries are coming up in the coastal belt and districts like Shanghai and Guangzhou."

Indonesia is also working towards restructuring its national palm oil commission on the lines of the Malaysian Palm Oil Board (MPOB).

Apart from the potential due to increasing global demand, Indonesia has new challenges too like the clearing of forest land to increase oil palm plantations. The news hit headlines in the recent past when the most coastal region in Indonesia and even Malaysia were covered with haze due to this forest fire.

"Some unscrupulous members of the industry give a bad name to the whole sector," Bangun said.

As Indonesia is working towards increased output, Malaysia is working towards value-addition procedures. India being the number one importer of palm oils is likely to benefit as the scale shifts in favour of Indonesia.

India has a lower import duty for crude oils vis-a-vis the refined ones.