RI FALLS SHORT OF CPO PRODUCTION TARGET

By Andi Abdussalam

Jakarta, Dec 27 (Antara) - Indonesia is expected to fall short of the CPO production target, set at  28 million tons this year, but the country's palm oil council predicts production will increase slightly to 29.5 million tons in 2014.          "This year, Indonesia's crude palm oil (CPO) production is forecast to reach only 26.2 million tons, thereby falling short of the target set between 28 and 28.5 million tons. We hope that next year, Indonesia's CPO production will show a slight rise and reach 29.5 million tons," the General Chairman of the Indonesia Palm Oil Board (DMSI) Derom Bangun stated in Medan, North Sumatra, on Thursday.           Thus, with a remainder of 2.1 million tons from 2013, the country is expected to have a stock of 31.6 million tons of CPO in 2014.           Indonesia, the world's largest crude palm oil producer, fell short of the target this year, as a result of extreme weather conditions that affected the harvest.       "Initially, the production in 2013 was estimated to be between 28 million tons and 28.5 million tons, but due to bad weather conditions, it is estimated to only reach around 26.2 million tons," noted Derom Bangun.             The drop in production is the result of extreme weather conditions that caused a slump in domestic harvests.  Although the production had fallen, Derom noted that it will still surpass 2012's production of 25.7 million tons.           Derom explained that the fall in Indonesia's CPO production was one of the factors that had caused a spike in palm oil prices in the commodity market and touched around US$900 per metric ton, which is up from around US$800 per metric ton earlier.           Derom pointed out that the prices were expected to further increase due to a slump in production. Moreover, domestic CPO consumption had driven up biodiesel production. He also noted that the increasing use of biodiesel will lead to a decline in exports, which will further trigger price hikes.           According to Fadhil Hasan, executive director of the Indonesian Palm Oil Producers Association (Gapki), the uncertain weather conditions in a number of countries have boosted CPO demand in the world market.          "It seems that the CPO global market is turning bullish again. Of late, there has been an increased demand for CPO," Hasan stated before he inaugurated the Indonesian Palm Oil Conference (IPOC) in Bandung, West Java, late last month.          Indonesia's CPO exports in 2013 are forecast at 19 million tons, increasing from about 18.5 million tons in 2012. However, export prediction for 2014 is only set at 18 million tons.          Hasan remarked that Indonesia's CPO exports and its downstream products in October 2013 increased 13 percent, to reach 1.856 million tons from 1.643 million tons in the previous month. This figure also showed a 30 percent increase as compared to the same period last year, where it stood at 1.424 million tons.          The significant demand for CPO came from key CPO importers such as China, India, and the European Union. India will continue to be the top importer of Indonesia's CPO, importing 488 thousand tons.  This figure showed a 13 percent increase from that of the previous month, which stood at 431 thousand tons.          The increase in India's demand for Indonesia's CPO was due to the fact that the soybean harvest in that country fell short of its previous target, including its vegetable oil harvest target, Hasan added.          Second only to India, is the European Union. It showed a 52 percent increase in CPO imports, with 395 thousand tons in October 2013, as compared to 260 thousand tons in September.           Also, the CPO demand from China has drastically increased in October. China's demand for CPO imports from Indonesia in October rose by 62 percent to 296 thousand tons from 182 thousand tons in the previous month.          China increased its demand for Indonesia's CPO due to its declining vegetable oil production while its vegetable oil consumption, through food and biodiesel, also increased.          These facts have contributed to the increase in CPO prices. By year-end, the price of CPO has increased from US$800 per metric ton to US$900 per metric ton.          The increase in the CPO prices in the international market was also responsible for an increase in local CPO prices, which reached Rp10,160 per kg this month (December 2013).  It is expected to further increase to Rp10, 210 per kg in March 2014.          Chief of Bank Indonesia (BI)'s office in North Sumatra Hari Utomo pointed out that palm oil still served as an engine for economic growth in North Sumatra, which is one of Indonesia's key palm oil producing provinces.          He added that palm oil is expected to boost North Sumatra's economic growth in 2014, which is forecast at 5.6-5.8 percent.          According to Derom, in 2014, Indonesia is expected to have a CPO stock of 31.67 million tons, which will be obtained from the estimated target of 29.5 million tons plus 2.1 million 2013 CPO stock.          Of the 29.5 million tons of production, about 18 million tons will be exported, while the remaining ones will be used for domestic consumption, especially for food, industry, biodiesel, and stock.     The 18 million tons allocated for exports in 2014, are smaller than the planned exports in 2013, which were predicted at 19 million tons.         The volume of exports can drop further if the government seriously implements its regulation on the increase in biodiesel use by 10 percent in 2014.          "Attendants of the Oil World Outlook Conference held in Hamburg, on November 30, 2013, were heedful to the prediction that Indonesia's palm oil production and exports were inclined to fall in 2014," he said.          The participants at the Oil World Outlook Conference showed serious concerns for Indonesia's CPO production because it is the largest CPO producer in the world and its production is essential to meet the increasing demands of the global market.          In 2014, the world demand for COP will reach 58.3 million tons.  By 2020, Indonesia expects to increase its annual CPO production to 40 million tons.          This figure gives Indonesia the potential to become the exclusive CPO supplier for the world market in the future.          Thus, if Indonesia's production and exports did not experience a major increase, then the CPO export price is predicted to rise in 2014.***3*** (T.A014/INE/H-YH) EDITED BY INE (T.A014/A/BESSR/A/Yosep) 27-12-2013 23:23