Press Release
Indonesian Palm Oil Association (IPOA)
PALM OIL INDUSTRY 2020 REFLECTION AND 2021 PROSPECT
2020 REFLECTION
Palm oil industry started the year 2020 with optimism as in December 2019 the price of CPO cif Rotterdam reached USD 787 /ton, which had started increasing from USD 542 /ton since August 2019 after reaching the average of USD 524 /ton during the period of January-August 2019. But, during January-May 2020 the price dropped and reached USD 526 /ton due to the following factors: (1) The demand in China started declining because of the Covid-19 pandemic, (2) Soybean supply pressures to China as a result of the trade war with the US decreased due to the harvest in Brazil, and (3) The drop of oil to USD 27/barrel (USD 147 /ton). In May 2020, China had recovered from the pandemic and massively increased its imports of oilseed and vegetable oils to replenish its depleted stock, sending the prices of vegetable oils up. The commitment of President Joko Widodo (Jokowi) who stated in his speech in August 2020 to continue the implementation of the government’s mandatory program of biodiesel had sustained the rising trend of vegetable oil prices.
Featured image via detik.net.id
The combination of good price in early 2020 that had enabled growers to fertilize and restore their oil palm plantations and favorable weather condition had increased the production of CPO & PKO at the average of 3,917 thousand tons per month during January – June 2020, then rose to the average of 4,680 thousand tons during the period July – December 2020. Along with the production increase, the price of CPO and vegetable oils increased from the average of USD 646 /ton during first semester 2020 to USD 775 /ton during the second semester 2020.
The policy on large scale social restriction (PSBB) at home due to the outbreak of Covid-19 pandemic caused the decrease of consumption for foods from 801 thousand tons in January 2020 to 638 thousand tons in June 2020. As a result of restriction easing, it increased to 723 thousand tons in December 2020. The consumption for oleochemical had been continually rising due to the increase of consumption of soaps and cleaning agents from 89 thousand tons in January 2020 to 197 thousand tons in December 2020. The consumption for biodiesel in 2020 increased from the level in 2019 as a result of the government’s policy to scale up biodiesel program from B20 to B30.
Generally in 2020, the domestic consumption of palm oil products reached 17.35 million tons, an increase of 3.6% from consumption in 2019 at 16.75 million tons.
Due to global impacts of pandemic, the export volume of Indonesian palm oil in 2020 dropped to 34.0 million tons, as compared to 37.39 million tons in 2019. The largest drop was seen to China (-1,96 million tons), to EU (-712.7 thousand tons), to Bangladesh (-323.9 thousand tons), to Middle East (-280.7 thousand tons), and to Africa (-249.2 thousand tons). But export volume to Pakistan increased (+275.7 thousand tons) and to India increased 111.7 thousand tons. Despite decline in export volume, export value in 2020 increased, reaching USD 22.97 billion, which is higher than export value in 2019 at USD 20.22 billion.
Indonesia’s trade balance during 2019 had been almost every month seeing negative, with a total deficit of USD 3.23 billion, as compared to always positive every month during 2020, except January and April, with a total surplus of USD 21.72 billion. During 2020, Indonesia’s trade balance saw a surplus of USD 21.27 billion, while the exports of palm oil products contributed USD 22.97 billion. The export data has shown that during the pandemic, the palm oil industry had given a very significant contribution in keeping the positive trade balance.
2021 PROSPECT
It is predicted that the impact of Covid-19 pandemic will not yet stop in 2021. Indonesia’s palm oil production in 2021 will significntly increase as a result of better agriculture practices, favorable weather condition, and attractive prices. The palm oil production is estimated to reach 49 million tons of CPO and 4.65 million tons of PKO.
With the government’s commitment to continue the B30 program, biodiesel consumption is predicted to reach 9.2 million KL (Aprobi 2021), which is equivalent with 8.0 million tons of crude palm oil (CPO).
The domestic use of palm oil for oleochemical in 2021 is predicted to reach around 2.0 million tons and around 4.5 million tons for export (Apolin 2021).
The global demand for vegetable oils will depend on the success of Covid-19 vaccination. The vaccination success will increase economic activities, which will then increase the consumption of vegetable oils, including palm oil. Besides, many countries have to be more open due to economic reason.
Indonesia’s palm oil export is predicted to increase in 2021, in terms of volume and value. The factors expected to disturb demand include the recurrence of Covid-19 in China and other countries, and the outbreak of African Swine Fever that had disrupted the demand for oilseed and oilmeal, which will then affect the demand for vegetable oils, including palm oil.
Important issues that will become the focus of GAPKI’s actitivies in 2021 are as follows: (1) Application and implementation monitoring of the omnibus law for job creation (Undang-Undang Cipta Kerja — UUCK) and its implementing regulations; (2) Strengthening the application of Sustainability, through the acceleration and finalization of ISPO certificates for members of GAPKI, and
(3) Strengthening partnership to accelerate the implementation of replanting program for smallholders (PSR).
Jakarta, 4 February 2021
Indonesian Palm Oil Association (IPOA)
For further information, please contact:
Mukti Sardjono
Executive Director GAPKI
Phone/Fax:
021-57943871
Fax. 021-57943872
Appendix 1.
Statistics of Indonesia Palm Oil 2020
DEC
*in 1.000 ton
Appendix 2.
Indonesian palm oil supply and demand 2019, 2020 and estimation in 2021
