Indonesia's February palm oil output likely to fall

Indonesia's February crude palm oil (CPO) production is expected to continue to fall because of droughts and forest fires, threatening stockpile levels, according to a Reuters survey. Production of CPO in February may drop to 2.30 million tonnes, according to the median estimate in a survey of two industry associations and one of the country's largest planter.
That is down from output of 2.44 million tonnes in January, and the lowest since February 2015. Indonesia's annual palm oil output is expected to fall to about 32.1 million tonnes this year, which would be the first decline since 1998, due to drought caused by the El Nino weather pattern, Indonesian Palm Oil Association (GAPKI) said. February palm oil exports from Malaysia, the world's second-biggest palm producer after Indonesia, fell 15 percent from a year earlier, according to industry regulator Malaysian Palm Oil Board (MPOB).
"Indonesia's (February) monthly production fell due to drought last year, and also partly due to forest fire in 2015," said Sahat Sinaga, executive director at the Indonesia Vegetable Oil Industry Association (GIMNI). Meanwhile, amid the decline in production, domestic consumption rose due to the increasing use of palm oil for biodiesel blend, Sinaga said. "This will continue toward the end of the year and this is dangerous as it can cause drop in export volume," he said.
Indonesia has raised the minimum bio content in domestic diesel fuel to 20 percent this year from 15 percent and will raise it to 30 percent in 2020. Indonesia's CPO exports in February are expected to be 2.01 million tonnes, little changed from 2.005 million tonnes in January, the survey showed. Palm oil stockpiles are expected to rise to 3.63 million tonnes, from 2.03 million tonnes in January, according to the survey.
Indonesia's domestic consumption of the tropical oil was estimated in a range between 600,000 tonnes and 928,000 tonnes, according to the survey responses. GAPKI showed January palm oil and palm kernel oil exports at 2.1 million tonnes. The group's data for February has not been released yet. The Reuters survey comprises contributions from GAPKI, GIMNI, and PT Sinar Mas Agro Resources & Technology Tbk, one of the largest listed palm oil companies.