JAKARTA – Indonesia’s palm oil industry players are facing mounting challenges to meet the rising need for palm oil at local and global markets, while their production growth has been continually stagnating during the last five years. The increase of local palm oil consumption is not only caused by the growth of consumption for foods, but also for bioenergy as the government has been continually upgrading the biodiesel mandatory program.
“As the world’s largest producer of palm oil, Indonesia is dealing with a paradox: production has stagnated during the last five years. But conversely, the consumption for palm oil has been continually surging,” the Indonesian Palm Oil Association’s (GAPKI) Chairman Eddy Martono said during the High Level Dialogue on Disruptions and Future Palm Oil Industry in Jakarta on Tuesday (10/06/ 2025).
Eddy said that the stagnant production is resulted from the fact that many of oil palm trees are already old or reaching the age of more than 25 years. “In the meantime, we’re also facing a limitation of land areas for expansion. As a result our average annual growth rate (AAGR) of production only reached 0.42% during 2020-2024,” Eddy said.
He said during the period the growth of palm oil consumption at domestic market has been continually surging, averaging at annual growth of around 7.4% as a result of the increase of consumption for foods at 3.1%, oleochemical at 18% (especially very high during the COVID-19 pandemic) and consumption for biodiesel production at 14.8%.
The government has continually upgraded the production of biodiesel under mandatory program from 30% (B30) in 2020, to 35% (B35) in 2024, to 40% (B40) in 2025, and expected to 50% (B50) in 2026.
“This year alone, the domestic consumption of palm oil is projected to reach 26.1 million tons. Certainly, this will limit our export volume,” he added.
GAPKI predicted that in 2025 the production of palm oil will reach 53.6 million tons. Exports are estimated to decrease to 27.5 million tons, which are lower than the exports in 2024 at 29.5 million tons. (*)
