Indonesia forecasts palm oil production to grow to 47 mln tonnes in MY 2025/26

According to a USDA Foreign Agricultural Service (FAS) report, Indonesia’s palm oil production is projected to increase by 3% to 47 mln tonnes in the 2025/26 season, driven by favorable weather and increased fertilizer use. The April 14 report notes that El Niño and Indian Ocean Dipole weather patterns will have minimal impact, ensuring normal dry season conditions. Additionally, a 14–59% drop in fertilizer costs from 2022 to February 2025 is expected to boost their application.

The harvested area for palm oil will remain at 14.4 mln ha, while the share of immature oil palms is set to rise from 15–16%, though still below the 2011–2014 peak. The USDA FAS anticipates significant expansion of palm plantations in coming years due to high palm oil prices. Domestic consumption is expected to grow to 22.6 mln tonnes in 2025/26, fueled by demand in industrial and food sectors, particularly with the B40 biodiesel mandate introduced in March 2025.

Industrial palm oil consumption is forecast to reach 14.9 mln tonnes in the next marketing year, largely due to the B40 mandate. Indonesia is also considering a B50 mandate, which would require an additional 4 bln liters of biodiesel production capacity beyond the current 19.7 bln liters. In 2025, capacity is expected to increase by 1.5 bln liters. Food sector palm oil use will rise slightly by 50 thsd tonnes to 7.4 mln tonnes.

Due to growing biodiesel demand, Indonesia’s government raised export levies on palm oil products by 10%. As a result, palm oil exports are projected to grow marginally to 24 mln tonnes in 2025/26 from 23 mln tonnes the previous year. Demand from China, India, and Pakistan will continue to drive exports, though reduced imports by China and India, not fully offset by Pakistan’s increased demand, will limit growth.

Palm oil stocks in Indonesia are expected to rise by 8% to 5.3 mln tonnes in 2025/26, reflecting higher supplies. High prices and demand, particularly for biodiesel, continue to shape positive prospects for Indonesia’s market, though export restrictions and competition from other vegetable oils may constrain growth.

Tags: Indonesia, palm oil