Business Recorder

12 January, 2011

Indonesia expects crude palm oil output to increase by a marginal 1 million tonnes to 22 million this year, an official at the Indonesian Palm Oil Association said on Tuesday. An unusually long rainy season has wreaked havoc on most of the country’s plantation crops, tightening supply to global markets and driving up palm oil prices to near three-year highs.

“The additional production comes from expansion in 2007 whereby the trees have started to produce oil,” Susanto, GAPKI’s head of marketing, told reporters in a press briefing. Palm oil output from the world’s top exporter may top 22.5 million tonnes, he added.

The industry forecast was below the government’s forecast, which expects a 5.3 percent increase in production at 24.43 million tonnes for this year on the back of expanded acreage, improving yields and expected good weather. But the association expect the government will slap a maximum tax of 25 percent on exports as palm oil prices continued to rally, Joko Supriyono, GAPKI’s secretary general told reporters.

Malaysian palm oil futures rallied to a 33-month high early last week to 3,905 ringgit per tonne, but eased to 3,745 ringgit on Tuesday. The export tax is intended to ensure that domestic requirements are met and to reduce volatility in domestic cooking oil prices. Palm oil exports in 2010 were estimated at 15.3 million to 15.5 million tonnes, slightly below 2009 at 15.5 million tonnes, Supriyono said.

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