Indonesia’s palm oil consumption surges as exports decline

Nearly half of Indonesia’s crude palm oil (CPO) output is now consumed domestically, with consumption rising to 23.8 million tonnes in 2024 while production dropped to 52.7 million tonnes from 54.8 million tonnes in 2023, according to the Indonesian Palm Oil Producers Association (Gapki). The increase in domestic demand is largely driven by the biodiesel mandate, alongside needs from the food industry.

Gapki chairman Eddy Martono stated that Indonesia remains the world’s largest producer and consumer of palm oil, accounting for 57% of global production and 27% of global consumption. Speaking at a webinar hosted by the Institute for Development of Economics and Finance (Indef), he highlighted production challenges, including land conflicts and the need to rejuvenate smallholder plantations. However, the priority remains supplying local biodiesel and food industries. Martono also projected strong CPO prices through the end of 2025, estimating a range of US$1,100 to US$1,200 per tonne, with a potential spot price of US$1,300 on CIF Rotterdam terms.

Indonesia’s palm oil exports weakened last year as prices surpassed those of other vegetable oils, prompting global buyers to turn to cheaper alternatives like soybean oil. China and India remain the largest external markets, though shipments to India fell by 28% year-on-year in the first half of 2025 due to price sensitivity. According to Oil World, Indonesia continues to be India’s largest palm oil supplier, exporting 4.4 million tonnes in 2024.

Smallholders, managing 42% of Indonesia’s palm oil plantations, face the need for replanting to boost yields significantly. Martono suggested interim income support or interplanting with seasonal crops like corn or upland rice to ease the transition. However, if exports are constrained by the domestic biodiesel program, global vegetable oil supplies could face disruptions, potentially driving prices even higher, experts warn.

Tags: Indonesia, palm oil