Indonesia poised to be top palm oil producer
March 30 2006
SINGAPORE: Indonesia may overtake Malaysia as the world's top palm oil producer by next year, much earlier than previously expected, as Jakarta encourages investments in plantations to profit from the demand boom, a senior official at Rabobank said yesterday.
As Indonesia aggressively pushes palm oil production to use its vast tracks of unused land, more Malaysian plantation firms, unable to find opportunities to expand at home, are putting their money in Indonesia, said Sami Khan, the bank's head of strategic advisory and research for South-East Asia.
"If not this year, we expect Indonesia to be the leading palm oil producer by next year," Khan said.
Earlier, industry analysts were expecting it would take about three years for Indonesia to displace Malaysia as the leading producer of palm oil.
South-East Asia accounts for 90 per cent of global palm oil production.
Hamburg-based oilseeds analysts Oil World expects Malaysia's 2006 palm oil production to rise only 60,000 tonnes to 15.02 million tonnes, thanks to erratic weather conditions. Output in 2005 rose 990,000 tonnes on the year.
But industry and government officials expect healthy growth in Indonesian output this year, rising 1.1 million tonnes to 14.7 million tonnes.
This would sharply narrow the production gap between the two countries.
"Malaysian plantation companies are constrained and finding it difficult to expand. They are increasingly looking for investment opportunities in Indonesia," Khan said.
Despite the sharp rise in global output expected this year, palm oil prices would remain firm because of increased demand from China and the world's thirst for biofuel.
"For the long term, we are bullish on palm oil," Khan said. - Reuters