Indonesia may sharply cut palm oil exports.

The Indonesian Palm Oil Producers Association (GAPKI) has warned that a strong El Niño could reduce the country’s crude palm oil (CPO) production by up to 5 mln tons. According to GAPKI Chairman Eddy Martono, the most significant impact of adverse weather conditions on production could be felt as early as 2027.

Indonesian producers expect CPO output to reach around 53 mln tons in 2026. This means that under the worst-case scenario, potential losses could approach 10% of annual production in the world’s largest palm oil producing and exporting country.

Another factor expected to reduce export availability is higher domestic consumption of palm oil for biodiesel production. According to GAPKI, the shift from B40 to B50 could increase CPO consumption by the biodiesel industry to 16.3–17 mln tons per year.

GAPKI stressed that supplying the domestic market will remain the priority. Therefore, a combination of lower production due to El Niño and higher CPO consumption for biodiesel would primarily affect overseas shipments. “What will decline is export volumes,” Martono said.

At the same time, the association is not yet predicting the scale of a potential increase in palm oil prices. Apart from El Niño and Indonesia’s biodiesel policy, the market will also depend on supplies of competing vegetable oils. Higher production of soybean, sunflower and rapeseed oils could increase competition and partially limit upward pressure on CPO prices.

Tags: export, Indonesia, palm oil