Indonesia palm oil use surges as exports fall

Almost half of Indonesia’s crude palm oil (CPO) output is now absorbed by the domestic market, as CPO consumption rose to 23.8 million tonnes in 2024 while production fell to 52.7 million tonnes, down from 54.8 million tonnes in 2023, according to the Indonesian Palm Oil Producers Association (Gapki).

“The biodiesel mandate is driving up domestic use, with food consumption followed by energy or biodiesel demand,” Gapki chairman Eddy Martono said on Monday.

Speaking during a webinar hosted by the Institute for Development of Economics and Finance (Indef), Eddy added that Indonesia is the world’s largest producer as well as consumer of CPO, accounting for 57% of global output and 27% of global use.

He also acknowledged production challenges, such as land conflicts and the need to rejuvenate smallholder plantations with new plants, but stressed the priority is supplying local biodiesel and food industries.

Eddy continued that CPO prices are expected to remain strong through the end of 2025 at an estimated range of US$1,100 to US$1,200 per tonne, with a potential to reach a spot price of US$1,300 on CIF Rotterdam.

“Global vegetable oil demand continues to rise while production in Indonesia and Malaysia has stagnated, supporting high prices,” he said.

Regulatory clarity remained a key concern, and Gapki urged the government to issue clear land certificates for both corporate and community plantations.

Eddy said smallholders manage around 42% of palm oil plantations in the country, many of which needed replanting. Doing so could triple low annual yields of as little as 10 tonnes of fresh fruit bunches per ha, and interim income support or interplanting with seasonal crops like corn or upland rice could ease the transition, he suggested.

If exports were constrained by the domestic biodiesel programme, however, the global vegetable oil supply could be disrupted and push up prices even higher, warned Eddy, who urged striking a balance between domestic supply and exports.

Indonesia’s palm oil exports weakened last year, when prices rose above that of other vegetable oils and global buyers turned to cheaper alternatives.

China and India remain the largest external markets, but shipments to India dipped through mid-2025.

Indef senior economist Fadhil Hasan attributed the decline to price sensitivity.

“When palm oil is higher or the same price as other vegetable oils, India shifts to alternatives, especially soybean oil,” said Fadhil at Monday’s webinar, noting that exports to India were down 28% year-on-year in the first half of the year.

India’s overall vegetable oil consumption has continued to climb and reached nearly 25 million tonnes annually, with imported palm oil contributing around nine million tonnes. Indonesia remains its largest supplier of palm oil, shipping around 4.4 million tonnes of the commodity in 2024, according to Oil World.

Tags: consumption, demand, exports, domestic market, Indonesia, prices, Vegetable Oil, Crude palm oil, Production, biodiesel