KUALA LUMPUR: Indonesia will export lesser palm oil this year as it uses more of the commodity at home to blend into biodiesel, an industry group said, putting the country on track for its first drop in overseas sales of the tropical oil in five years.
The world's top producer and exporter of palm oil is seen shipping out 23-24 million tonnes of the edible oil this year, said Fadhil Hasan, executive director of the Indonesian Palm Oil Association (GAPKI), as much as 9 percent below year-ago levels.
Lower exports could propel further gains in benchmark palm oil futures that are currently near a three-week top of 2,495 ringgit ($570.16) per tonne. Last year, prices rallied 10 percent on biodiesel demand hopes and worries of damage to yields from dryness linked to an ongoing El Nino weather event.
"Hopefully in 2016 (biodiesel consumption) will increase significantly," GAPKI's Hasan said at a palm oil economic review seminar in Kuala Lumpur on Tuesday.
While Indonesia's palm oil output this year will be higher than previously expected, given signs the El Nino is easing and as new plantations come online, exports will be less than 2015 because of domestic market absorption, he said.
Indonesia's palm oil shipments have risen over the past few years, from 16.42 million tonnes in 2010/11 to 25.3 million tonnes last year, U.S. Department of Agriculture data shows.
But the trend is likely to change this year with the country promoting the use of biodiesel to cut its oil import bill and to mop up its supplies of crude palm oil. Last year, Indonesia raised biodiesel subsidies and the minimum bio content in diesel fuel to 15 percent from 10 percent.
Palm prices could climb to $580 to $600 per tonne in 2016, Hasan said, although higher Indonesian output will cap gains.
He pegged the country's palm oil output at 35 million tonnes this year, versus 32.5 million tonnes in 2015. GAPKI had earlier forecast output at 33.5 million tonnes for 2016.
"Apparently we see that the El Nino now is easing, as some parts of Indonesia are seeing rain," Hasan said.
"The expansion of Indonesian palm oil plantation in the last three to four years was big, around 500,000 hectares per year, so even if (production is) affected by El Nino, it will be compensated by new harvested crops."
Palm output in Malaysia, the world's No.2 producer, is also expected to rise, to 20.1 million tonnes in 2016 from 19.96 million tonnes a year ago, the Malaysian Palm Oil Board said on Tuesday.
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