Production

Indonesian meterological Service (BMKG) data indicates that Southern Sumatera experienced extremely deficient rainfall during the July August 2014 period. Sumatra's Jambi province also had poor rainfall from August through October 2014. These two regions are more likely to experience production declines over the coming months in Sumatera, dropping as much as 30% below optimal during summer 2015. Note Indonesia's production cycle is typically at its lowest during this period. The drought hit areas of Southern Sumatera represent roughly 20 percent of Indonesia's total palm oil output. Northern Sumatera fared better, with mild rainfall deficits in June, July and August. It is expected that Northern Sumatera production will not decline, or only do so minimally in 2015. Northern Sumatera represents approximately 45 percent of Indonesia's palm oil production.

Central Kalimantan was also hit by insufficient rain between July and October 2014, implying possible production declines as high as 30 percent in summer 2015. The rest of Kalimantan also experienced periods of insufficient precipitation, although the most significant hit to palm oil production was in the Central region. Eastern Kalimantan received reasonably good precipitation for palm oil production.

Although less-than-optimal yields due to moisture deficiencies are significant enough to slow growth, this is offset by gains in Indonesia's overall productivity. Specifically, Indonesia's planting expansion started in 1998, and a large section of its plantation area is undergoing the rapid yield growth typical of palm oil that has not reached full maturity. As a result, post still expects production to increase in 2014/15. Under normal conditions, productivity will grow by 10 percent (33.5 million metric tons), although the documented rainfall deficiencies may limit increases to a little as seven or eight percent. As a result, Post adjust its 2014/15 production estimate from 33.5 million to 33 million metric tons. 2013/14 production remains unchanged at 30.5 million metric tons.

New production areas continue to open, but at a declining rate. Seed sales for 2014 fell by nearly 20 percent in 2014, much higher than estimated in Posts 2014 annual report. Post continues to verify the distribution of certified seed between new plantings and replanted areas. Also, concerns for a potential El Nino phenomena continue to decline with BMKG again downgrading its expectation of a late onset weak El Nino.

Consumption

Indonesian palm oil consumption did not reach as high a level as previously reported in the November 2014 update. Industry estimates for biofuel realization in Indonesia came in at 1.6 million liters, well below the targeted 3.3 million liters that the Indonesian Palm Oil Association had targeted previously. Indonesian biodiesel production was limited by declining oil prices, which left biodiesel development less competitive and reliant on heavier government intervention. As a result, post lowers its industrial consumption estimate from 3.8 to 3 million tons. 2014/15 is revised downward to 4 million tons, although this could rise if Indonesia increases its biodiesel budget or petroleum prices fall.

Trade

2013/14 Indonesian palm oil exports are revised up to 21.718 million tons, based on trade data. Strong first quarter 2014/15 marketing year palm oil exports are led by shipments to India and Pakistan. High palm and soy supplies have pushed down prices and are driving price buying in South Asia. Additionally, industry contacts report that Indian buyers may be taking precautionary moves in advance of an anticipated import tariff. This appears accurate, as Post India reports that the Indian government hiked the import duty on crude vegetable oil from 2.5 to 7.5 percent and refined oil from 10 to 15 percent, effective December 24, 2014. Reports indicate that the Indian oilseed industry continues to press for additional tariffs on crude vegetable oils from 2.5% to 10% and refined vegetable oils from 10% to 25% prior to India's rapeseed harvest anticipated for late February and March. Given these factors, industry sources expect Indian imports will soften in January.

Advance data shows October- December 2014 exports about 14 percent ahead of the same period in 2013 with imports peaking in October and remaining strong, but declining through December. Post notes that October, November and December recorded Indonesia's highest palm oil exports in calendar year 2014. Considering this information, Post's estimate for 2014/15 exports is revised slightly upwards to 22.5 million metric tons.

Stocks

Post revises 2013/14 ending stocks from 1.955 million tons to 2.037 tons due to downward revisions to consumption. 2014/15 ending stocks are set to grow following the decline in industrial consumption and the previous year's stock declines.

Oil, Palm Indonesia

2012/2013

2013/2014

2014/2015

Market Year Begin: Oct 2012

Market Year Begin: Oct 2013

Market Year Begin: May 2014

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Planted

0

9,935

0

10,325

0

10,640

Area Harvested

7,685

7,685

8,115

8,115

8,540

8,540

Trees

0

1,490,250

0

1,548,750

0

1,596,000

Beginning Stocks

1,445

1,445

1,758

1,795

2,618

2,037

Production

28,500

28,500

31,000

30,500

33,500

33,000

MY Imports

38

38

40

40

0

0

MY Imp. from U.S.

0

0

0

0

0

0

MY Imp. from EU

0

0

0

0

0

0

Total Supply

29,983

29,983

32,798

32,335

36,118

35,037

MY Exports

20,373

20,373

20,400

21,718

22,000

22,500

MY Exp. to EU

3,494

3,494

3,500

3,500

3,500

3,500

Industrial Dom. Cons.

2,735

2,735

4,100

3,000

5,000

4,000

Food Use Dom. Cons.

4,882

4,845

5,400

5,300

5,900

6,000

Feed Waste Dom. Cons.

235

235

280

280

320

320

Total Dom. Cons.

7,852

7,815

9,780

8,580

11,220

10,320

Ending Stocks

1,758

1,795

2,618

2,037

2,898

2,217

Total Distribution

29,983

29,983

32,798

32,335

36,118

35,037

CY Imports

1

1

1

1

0

0

CY Imp. from U.S.

0

0

0

0

0

0

CY Exports

20,550

20,550

21,500

21,000

23,000

22,000

CY Exp. to U.S.

50

372

50

430

0

0

TS=TD

0

0

0

0

0

0