Indonesia's Palm Oil Consumption is Expected to Increase in 2022 Amid Uncertain Production

A farmer in the palm oil area in Indonesia.

The Indonesian Palm Oil Association (GAPKI) estimates that domestic consumption of palm oil for various needs will increase in 2022 but with production that is still uncertain due to several constraints.

Gapki Executive Director Mukti Sardjono explained that one of the factors that became an obstacle in oil palm production was that fertilization was hampered in 2021 due to scarcity and rising fertilizer prices which would affect productivity and production in 2022.

In addition, there is the La Nina phenomenon which also has an impact on domestic palm oil production.

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"The extreme wet weather occurred in early 2022 will not only affect production in the first semester, but also in the second semester of 2022," said Mukti, Friday (January 28).

He explained that 2021 palm oil production shows an anomaly where in the second semester, which is usually higher than the first semester in 2021, it is actually lower.

Therefore, according to him, production in the first semester of 2022 will be an indication of whether the production decline will continue or there will be an increase.

Mukti said that the production of CPO (crude palm oil) in 2022 is estimated to reach 49 million tons while PKO (palm kernel oil) will reach 4.8 million tons, bringing the total CPO and PKO to 53.8 million tons. This number increased by 4.87 percent compared to production in 2021 of 51.3 million tons.

According to Gapki, domestic consumption will be greatly influenced by the development of Covid-19 in Indonesia. In 2021, total domestic consumption for food will increase by 6 percent, for the oleochemical industry it will increase by 25 percent, and biodiesel needs will increase by 2 percent.

For 2022, Mukti estimates that consumption for food will increase at almost the same rate to around 800 thousand tons per month or 9.6 million tons per year. For oleochemical needs in 2021, palm oil consumption has flattened during the last month at around 180 thousand tons per month and is expected to continue in 2022 so consumption for oleochemicals is estimated at 2.16 million tons per year.

Consumption of biodiesel, said Mukti, depends on the mandatory biodiesel program set by the government. According to the 2022 program, the mandatory B30 program with 2022 biodiesel consumption is estimated at 8.83 million tons.

"Thus, domestic consumption in 2022 is estimated to be around 20.59 million tons. With production of 53.8 million tons and domestic consumption of 20.59 million tons, the volume for exports is estimated to be 33.21 million tons or around minus 3 percent of 2021," said Mukti.