Oilseeds and Products Update

An Expert's View about Cereals, Leguminous Crops, Oil Seeds in Indonesia

Posted on: 12 Mar 2012

Indonesian crude palm oil (CPO) production in marketing year (MY) 2011/2012 is predicted to decline.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 2/28/2012 GAIN Report Number: ID12101 Indonesia Oilseeds and Products Update 2012 Approved By: Dennis Voboril Prepared By: Jonn Slette/Ibnu Edy Wiyono Highlights: Indonesian crude palm oil (CPO) production in marketing year (MY) 2011/2012 is predicted to decline from an initial estimate of 25.4 million metric tons (MMT) to 25 MMT. This downward adjustment is primarily due to production losses because of widespread use of counterfeit seed stock. A coconut supply disruption has led to a decline in copra production by 8.75 percent from 1.6 MMT in MY 2009/2010 to 1.46 MMT in MY 2010/2011. Copra production is predicted to further decline to 1.43 MMT in MY 2011/2012. Indonesian production of crude coconut oil (CCO) decreased by 28,000 metric tons (MT) in MY 2010/2011 due to lower supply of copra. CCO production is predicted to further decline to 905,000 MT in MY 2011/2012. Post: Jakarta Oil, Palm Production Indonesia produced 23.6 MMT of CPO in MY 2010/2011. Although Post initially predicted that Indonesia would produce 25.4 MMT in MY 2011/2012, the final production figures proved to be lower. This decline is primarily due to the widespread use of counterfeit seeds, which is resulting in lower- than-estimated yields. Many planters ? particularly smallholder planters ? will continue to experience lower levels of productivity due to using counterfeit seeds in their fields. The Ministry of Agriculture and seed producers estimate that one third of oil palm plantations are planted with counterfeit seeds. One regional plantation office located in a province in Sumatra reports that upwards of half of the 140,000 hectare smallholder plantations in the province are planted with counterfeit seeds. As a result, potential production losses could be as high as 260,000 MT in the current marketing year in this particular province. Post expects that production losses due to the widespread use of counterfeited seed stock could reduce Indonesian CPO production by 1.6 percent to 25 MMT in MY 2011/2012. Consumption Indonesia consumed 6.52 MMT of CPO in MY 2010/2011. The food processing sector is the largest Indonesian end user of CPO. Industrial users of CPO registered the highest growth, at 34.3 percent. Biodiesel and oleochemical products account for the majority of this growth. Domestic CPO consumption is predicted to increase by 10 percent to 7.18 MMT in MY 2011/2012. Biodiesel producers process CPO directly into fatty acid methyl ester (FAME). The FAME is blended with diesel oil to produce biodiesel. The oleochemical industry uses CPO and refined palm oil products such as Palm Fatty Acid Distillate, olein, and stearin to produce a variety of oleochemical products. Trade In MY 2010/2011 Indonesian palm oil exports declined slightly by 0.91 percent over MY 2009/2010 (16.573 MMT to 16.423 MMT). This decline is due to logistical problems and higher domestic consumption levels. Dumai, Belawan, Panjang, and Teluk Bayur are the major Sumatran seaports from where Indonesian palm oil is exported to destination countries. These four seaports have the facilities that can support the requirement for loading and unloading palm oil destined for export markets, to include: Liquid storage tank capacity of 1.12 MMT; Pumps and pipelines necessary to transfer palm oil from storage tanks to vessels; and Wharfs that can accommodate large liquid bulk vessels. The development of these facilities, however, fails to keep up with the overall growth of Indonesia?s palm oil production. The wharfs of the aforementioned seaports can only serve one or two vessels with average loading times of 4 hours per vessel. As production expands, vessel traffic will subsequently increase and the palm sector will require greater port capacity. There are several consequences that could result from higher vessel traffic and the failure of seaports to expand, to include: Vessel will need more waiting time to dock; Relatively slow moving palm oil from storage tank to the tankers Longer waiting time for the trucks and small-medium boats to transfer their carrying palm oil to storage tank. This situation lead to higher levels of domestic palm oil stocks caught up in transit. In MY 2010/2011, Kalimantan produced a 5.2 MMT palm oil, equivalent to 22 percent of the overall national production. However, Kalimantan does not have deep water seaports that can serve vessels. Consequently, palm oil producers from the Kalimantan must transport their palm oil to Dumai and Belawan seaport using small-medium sized boats before the palm oil can be exported to destination countries. Weather related disturbances and congestion in Dumai and Belawan can potentially increase levels of Kalimantan-based palm oil stock in transit. Palm oil distribution from the mills and refineries to the seaports is also complicated because of bad road conditions and heavy traffic on small roads. This also increases stock of in-transit Indonesian palm oil. Poor logistical infrastructure in Indonesia is confirmed by World Bank in its Trade Logistic Performance Index (LPI). Indonesia?s LPI rank was downgraded from 43 out of 150 countries in 2007 to 75 out of 155 countries in 2010. While waiting for the government to expand major seaports in Sumatra and to build the Maloy deep water seaport in East Kalimantan, palm oil producers export their products through Tawau seaport in Sabah, Malaysia and Singapore. Tawau port is one of the 8 main ports in Sabah. The facilities are supportive and the port is accessible by international shippers. The above map shows that palm oil producers in West and East Kalimantan have more access to export their products through Tawau seaport. This alternative export channel is expected to help supporting Indonesian palm oil export growth in the current marketing year. Post predicts that Indonesian palm oil exports will increase by 6.6 percent to 17.5 MMT in MY 2011/2012. Ending Stock There are several categories of stock based on palm oil export flow from the mills and refineries to the seaports: Stocks that keep at the storage tank in the major seaports. The stock at this category can reach 1.12 MMT at maximum. Stocks that keep at the storage tank in palm oil mills and refineries. Stocks in transit: palm oils that are transporting to the seaports by trucks and small medium boats. Limited infrastructure in the major seaports is increasingly straining the capacity of storage tanks in port areas. Should the bottleneck in the major seaports continue, stocks in transit as well as stocks in the Oil, Palm 2009/2010 2010/2011 2011/2012 Indonesia Market Year Begin: Oct 2009 Market Year Begin: Oct 2010 Market Year Begin: Oct 2011 USDA Official New Post USDA Official New Post USDA Official New Post Area Planted 0 0 0 0 (1000 HA) Area Harvested 0 6,430 0 6,820 0 7,210 (1000 HA) Trees 0 964,500,000 0 1,023,000,000 0 1,081,500,000 (1000 TREES) Beginning Stocks 190 190 242 242 773 922 (1000 MT) Production 22,000 22,000 23,600 23,600 25,400 25,000 (1000 MT) MY Imports 49 49 23 23 33 33 (1000 MT) MY Imp. from U.S. 0 0 0 0 0 0 (1000 MT) MY Imp. from EU 0 0 0 0 0 0 (1000 MT) Total Supply 22,239 22,239 23,865 23,865 26,206 25,955 (1000 MT) MY Exports 16,573 16,573 16,422 16,423 17,950 17,500 (1000 MT) MY Exp. to EU 2,950 2,950 4,100 2,143 4,500 2,500 (1000 MT) Industrial Dom. Cons. 1,165 1,165 1,700 1,565 2,150 2,000 (1000 MT) Food Use Dom. Cons. 4,110 4,110 4,800 4,785 4,800 5,000 (1000 MT) Feed Waste Dom. Cons. 149 149 170 170 170 180 (1000 MT) Total Dom. Cons. 5,424 5,424 6,670 6,520 7,120 7,180 (1000 MT) Ending Stocks 242 242 773 922 1,136 1,275 (1000 MT) millTs and roefinerites waill stalrt incDreasing. istribution 22,239 22,239 23,865 23,865 26,206 25,955 (1000 MT) Indonesia?s palm oil ending stocks increased significantly from 242,000 MT in MY 2009/2010 to 922C,000 MTY in MY 2010/2011 due to export logistic problems. Consequently, the utilized capacity of Imp rts 47 47 55 55 65 65 (1000 MT) storage tanks in the major seaports increased to 82 percent. The logistical infrastructure problems will keep being one of the major constraints to boosting palm oil export growth, as these challenges will take years solve. Higher palm oil production in the current marCY Imp. from U.S. 0 0 0 0 0 0 (1000 MT) keting year will be partly converted into higher ending stock. Post predicts that palm oil ending stock will increase to 1.275 MMT in MY 2011/2012. CY Exports 17,500 17,500 18,000 16,500 19,500 18,000 (1000 MT) CY Exp. to U.S. 0 72 0 48 0 50 (1000 MT) TS=TD 0 0 0 Comments AGR Number Comments To Post Oilseed, Copra Production Indonesia?s coconut production declined by 1.43 percent from 3.5 MMT copra equivalents in MY 2009/2010 to 3.45 MMT in MY 2010/2011. The above normal rainfall in MY 2009/2010 reduced the productivity of coconut trees in MY 2010/2011. Production of copra is determined by the availability of coconuts. Indonesian copra producers have witnessed a significant drop in coconut supply in MY 2010/2011 due to the following factors: 1. The rising demand from other coconut users to include coconut-based food producers, households, and restaurants; and 2. Export of coconut increased significantly by 189 percent from 48,500 MT copra equivalents in MY 2009/2010 to 140,000 MT in MY 2010/2011. With regard to this issue, Indonesian Coconut Forum (FOKPI) has submitted a proposal to Ministry of Trade to impose 30 percent export tax on coconuts. Export tax aim at securing coconut supply for domestic coconut-based food manufacturers. Coconut supply disruption has led to the decline in copra production by 8.75 percent from 1.6 MMT in MY 2009/2010 to 1.46 MMT in MY 2010/2011. Lower copra production amidst strong demand has raised the farm-gate-price of copra from IDR 6,500- 7,000 per kilogram to IDR 9,500-10,000 per kilogram in MY 2010/2011. Price of copra is expected to stay at high level in the current marketing year thereby providing incentives for copra makers to produce more copra. It would not be easy, however, for copra makers to procure more coconuts due to strong demand from other coconut users and low productivity of coconut trees as a result of old crops and improper agriculture practices. Post predicts that Indonesia?s copra production will further decline to 1.43 MMT in MY 2011/2012. Consumption Producers of CCO use nearly all copra in Indonesia. The producers crushed 1.495 MMT of copra in MY 2010/2011 to produce CCO. Approximately 1.44 MMT of copra will be crushed in MY 2011/2012. Trade Indonesia?s export volume of copra declined from 40,000 tons in MY 2009/2010 to 36,000 tons in MY 2010/2011 due to lower supply. Post, however, understands that Indonesia may still be able to export 40,000MT in MY 2011/2012. Ending Stock Ending stock decreased from 173,000 MT in MY 2009/2010 to 92,000 MT in MY 2010/2011 due to lower copra production. Ending stock is expected to further decline to 32,000 MT in MY 2011/2012. Oilseed, Copra 2009/2010 2010/2011 2011/2012 Indonesia Market Year Begin: Oct 2009 Market Year Begin: Oct 2010 Market Year Begin: Oct 2011 USDA Official New Post USDA Official New Post USDA Official New Post Area Planted 0 0 0 0 0 0 (1000 HA) Area Harvested 0 0 0 0 0 0 (1000 HA) Trees 0 0 0 0 0 0 (1000 TREES) Beginning Stocks 172 172 173 173 108 92 (1000 MT) Production 1,600 1,600 1,535 1,460 1,480 1,430 (1000 MT) MY Imports 0 0 0 0 0 0 (1000 MT) MY Imp. from U.S. 0 0 0 0 0 0 (1000 MT) MY Imp. from EU 0 0 0 0 0 0 (1000 MT) Total Supply 1,772 1,772 1,708 1,633 1,588 1,522 (1000 MT) MY Exports 39 39 34 36 31 40 (1000 MT) MY Exp. to EU 0 0 0 0 0 0 (1000 MT) Crush 1,550 1,550 1,552 1,495 1,460 1,440 (1000 MT) Food Use Dom. Cons. 0 0 0 0 0 0 (1000 MT) Feed Waste Dom. Cons. 10 10 14 10 14 10 (1000 MT) Total Dom. Cons. 1,560 1,560 1,566 1,505 1,474 1,450 (1000 MT) Ending Stocks 173 173 108 92 83 32 (1000 MT) Total Distribution 1,772 1,772 1,708 1,633 1,588 1,522 (1000 MT) CY Imports 0 0 0 0 0 0 (1000 MT) CY Imp. from U.S. 0 0 0 0 0 0 (1000 MT) CY Exports 39 39 40 35 40 40 (1000 MT) CY Exp. to U.S. 0 0 0 0 0 0 (1000 MT) TS=TD 0 0 0 Comments AGR Number Comments To Post Oil, Coconut Production CCO is extracted from copra. Indonesian production of CCO decreased 28,000 MT from 968,000 MT in MY 2009/2010 to 940,000 MT in MY 2010/2011 due to lower copra supply. As the production of copra is predicted to continue declining, production of CCO is predicted to further decline to 905,000 MT in MY 2011/2012. Consumption Domestic consumption of CCO registered a 32 percent increase in MY 2010/2011. Post sees that the consumption level will rise from 430,000 MT to 445,000 MT in MY 2011/2012. Export Indonesia exported higher volume of CCO at 572,000 MT in MY 2010/2011. Export of CCO is predicted to continue rising to 600,000 MT in the current marketing year of 2011/2012. Ending Stock Ending stock declined from 258,000 MT in MY 2009/2010 to 216,000 MT in MY 2010/2011 due to higher domestic and foreign demand. The stock may sharply decline to 76,000 MT in MY 2011/2012. Oil, Coconut 2009/2010 2010/2011 2011/2012 Indonesia Market Year Begin: Oct 2009 Market Year Begin: Oct 2010 Market Year Begin: Oct 2011 USDA Official New Post USDA Official New Post USDA Official New Post Crush 1,550 1,550 1,552 1,495 1,460 1,440 (1000 MT) Extr. Rate, 999.9999 1. 0.6245 1. 0.6288 1. 0.6285 (PERCENT) Beginning Stocks 171 171 258 258 226 216 (1000 MT) Production 968 968 968 940 968 905 (1000 MT) MY Imports 0 0 0 0 0 0 (1000 MT) U.S Tropical Oil Import from Indonesia by Volume (Metric Ton) MY Imp. from U.S. 0 0 0 0 0 0 (1000 MT) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 MY Imp. from EU 0 0 0 0 0 0 (1000 MT) Crude Coconut Oil 52,564 23,012 20,923 73,136 36,924 49,078 101,418 103,868 57,143 94,681 Total Supply 1,139 1,139 1,226 1,198 1,194 1,121 (1000 MT) Refined Coconut Oil 27,087 8,917 2,514 10,774 37,244 7,116 8 ,064 24,017 14,428 52,600 MY Exports 556 556 572 572 600 600 (1000 MT) Refined Palm Oil 2,747 2,304 15,450 14,980 54,643 50,745 67,868 72,436 48,476 50,244 MY Exp. to EU 97 97 110 110 125 125 (1000 MT) Crude Palm Kernel & Bab Oil 5,012 7,005 8,202 3,409 6,500 13,500 16,002 35,002 - 31,000 Industrial Dom. Cons. 200 200 255 235 247 250 (1000 MT) Refined Palm Kernel & Bab Oil 8,492 14,327 35,427 52,142 42,323 22,480 19,080 9 ,149 7,409 3 21 Food Use Dom. Cons. 125 125 173 175 193 195 (1000 MT) Total Tropical Oil 95,902 55,566 82,516 154,441 177,634 142,919 212,432 244,472 127,456 228,845 Feed Waste Dom. Cons. 0 0 0 0 0 0 (1000 MT) Total Dom. Cons. 325 325 428 410 440 445 (1000 MT) U.S Tropical Oil Import from Indonesia by Value (Thousand US$) Ending Stocks 258 258 226 216 154 76 (1000 MT) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total Distribution 1,139 1,139 1,226 1,198 1,194 1,121 (1000 MT) Crude Coconut Oil 18,315 10,438 14,036 45,130 20,209 38,657 123,739 83,198 47,826 158,426 CY Imports 0 0 0 0 0 0 (1000 MT) Refined Coconut Oil 9,648 4,098 1,917 6,926 24,004 6,189 10,474 25,073 14,006 91,899 CY Imp. from U.S. 0 0 0 0 0 0 (1000 MT) Refined Palm Oil 1,071 1,005 7,429 6,103 22,318 30,245 69,413 50,308 34,908 58,249 CY Exports 564 564 660 540 660 600 (1000 MT) rude Palm Kernel & Bab Oil 1,940 2,485 3,725 2,008 3,297 8,034 17,382 20,588 - 51,460 RCY Exp. to U.S. 50 104 50 57 50 95 (1000 MT) efined Palm Kernel & Bab Oil 4,139 6,685 23,444 36,014 24,937 19,177 21,751 6 ,948 7,657 7 59 TSo=tTD 0 0 0al Tropical Oil 35,113 24,711 50,551 96,181 94,765 102,302 242,759 186,115 104,397 360,793 Comments UAG.SR T Nruompbicear l Oil Import Price from Indonesia (US$/Metric Ton) Comments To Post 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 AppCendix: rude Coconut Oil 348.44 453.59 670.85 617.07 547.32 787.67 1,220.09 800.99 836.96 1,673.26 Refined Coconut Oil 356.19 459.56 762.41 642.85 644.50 869.72 1,298.91 1,043.99 970.76 1,747.13 Refined Palm Oil 389.88 436.18 480.84 407.40 408.43 596.02 1,022.76 694.52 720.10 1,159.32 Crude Palm Kernel & Bab Oil 387.07 354.73 454.17 588.99 507.21 595.12 1,086.24 588.20 - 1,659.99 Refined Palm Kernel & Bab Oil 487.39 466.61 661.75 690.70 589.21 853.05 1,139.98 759.39 1,033.49 2,368.17 Average Price 366 445 613 623 533 716 1 ,143 761 819 1,577 Source: USDA
Posted: 12 March 2012

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