Jakarta. The Council of Palm Oil Producing Countries (CPOPC) anticipates that palm oil production in Indonesia and Malaysia, major contributors to the global market, will plateau at approximately 70 million tons from 2024 onwards. The primary factors attributed to this forecast are environmental considerations and the escalating production cost.

"We will not see an exponential increase in CPO production in Malaysia and Indonesia. We believe production will stagnate at around 70 million tons, which is 84 percent of world production," Datuk Nageeb Wahab, Deputy Secretary-General of CPOPC, told the Jakarta Globe recently

Refinitiv's projections indicate that Indonesia is expected to produce 50.7 million tons of crude palm oil (CPO) this year, marking an increase from 45.1 million tons last year. Similarly, Malaysia is projected to produce 18.4 million tons this year, up from 18.1 million tons in the previous year.

Nageeb emphasized the likelihood of a short supply, attributing it to rising demands and the subsequent stagnation of supply. However, he expressed confidence in price stability at a favorable level. "There is going to be a short supply. By virtue, rising demands will cause supply to stagnate, but we expect prices to remain consistent at a good level," he said.

Large CPO companies are losing interest in expanding due to environmental concerns and increasing production costs. CPOPC forecasts prices to hover between $800- $1.000 per ton next year, up from this year's average price of around $ 900.

"When you don't have big expansion, supply will stagnate," he said.

Nageeb also noted that margins are narrowing but remain reasonable. "Production cost used to be $100 per ton 20 years ago, but now costs have risen to $400-$500. The margin is still there, but not exponential," he added.

Capitalizing on the outcome of the recent COP28 climate summit, CPOPC aims to leverage the global move away from fossil fuels. Rizal Affandi Lukman, Secretary-General of CPOPC, mentioned that Indonesia is on track to transition away from fossil fuels through the implementation of the B35 mandate.

"We are capitalizing on biodiesel usage, with an increase from B35 to B40 hopefully next year," he said. The B35 mandate is a policy that raises the palm oil-based biodiesel blend from 30 percent to 35 percent, with expectations to increase domestic demand for CPO by 2 million tons.
 

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