Indonesian Palm Oil Still Growing
22 February 2006 The growing Indonesian palm oil industry expects further increases for 2005/06, with an anticipated 15 million tons production.
The palm oil sector is one of the most dynamic sectors of Indonesian agriculture, with new investment continuing and output growing steadily. Continued area expansion and improved productivity and oil extraction rates are fuelling the growth.
In terms of market structure, smallholders own 28%, state-owned companies manage 12%, and private companies manage the remaining 60% of the production area. The greatest gains in productivity are reported among private plantations, where yields reached 19 tons/hectare/year of Fresh Fruits Bunches in 2005, up from 16 tons/hectare/year in 2004, according to the US Department of Agriculture’s Foreign Agriculture Service (USDA-FAS).
Prospects for continued growth in the palm oil industry remain bright. Many recently developed plantations, particularly in Kalimantan, have not even started to produce yet. In the next few years as these new areas begin to produce, Indonesia’s output is expected to surpass that of Malaysia. In addition, despite many objections concerning environmental issues and the suitability of the area for palm oil production, the government of Indonesia has discussed plans to make available up to 1.8 million hectares of public land in Kalimantan for the development of new plantations.
The sector also views bio-diesel as an important source of new potential demand, although the local industry has yet to develop any significant production capacity.
Despite these bright prospects, several obstacles hamper efforts for growth. These include a lack of certified seeds, theft at plantations and while product is in-transit, lack of access to financial credit, uncertain legal guidelines regarding land ownership and management, and growing concern regarding the environmental impact of palm oil production.
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