Indonesia’s palm oil output will expand for a sixth successive season in 2022-23, despite higher fertilizer costs and export taxes, US officials said, seeing exports hitting a record high too.

Indonesian production of the vegetable oil will grow by 500,000 tonnes next season, as starts in October, to an all-time high of 46.0m tonnes, the US Department of Agriculture bureau in Jakarta said, in their first forecasts for the period.

While higher fertilizer prices are raising plantations’ input costs, “large plantations and smallholder farmers stand to earn a great margin in the first half of 2022-23” than a year before – even factoring in raised export taxes too, the bureau said.

Furthermore, weather prospects appear “favourable”, with the national weather agency, BMKG, forecasting “normal-to-high” rainfall levels for next season for the key palm oil producing areas of Kalimantan and Sumatra.

Harvested plantation area looks set, at 15.4m hectares, to prove a little higher too next season, to judge by historic seed sale datasets.

‘Continued demand’

Such production will support record Indonesian palm oil exports of 30.0m tonnes, the bureau said, noting too “continued demand from major markets”, such as China and India.

“As more countries are expected to recover from the Covid pandemic, the food service sector will continue to drive palm oil demand in these markets.”

The conflict in Ukraine, the top exporter of rival vegetable oil sunflower oil, is also whetting some importers’ appetites for palm oil.

However, export supplies will be limited by Indonesia’s own appetite for palm oil, both as a cooking oil and its key feedstock for biodiesel manufacture.

Fuel demand

Indeed, separately on Thursday, the country’s coordinating minister for economic affair, Airlangga Hartarto, said that its biodiesel programme “will not stop at” B30, a 30% mix of biodiesel in transport diesel, with the country planning road tests on a 40% mixture.

The country is also working on using palm oil in the likes of jet fuel, Mr Airlangga said.

The USDA briefing assumed the blending rate for 2022-23 holding at 30%.

It also did not appear to take account of a raising last week in the maximum export levy, by $200 a tonne to $375 a tonne, and the scrapping of the domestic market obligation (DMO) scheme aimed at ensuring palm oil supplies for Indonesia’s own market.