Evidence of a dent to Indonesian palm oil production from dryness blamed on El Nino will start appearing this month, and end a winning output streak stretching back 18 years – to the last severe El Nino.
The US Department of Agriculture’s Jakarta bureau underlined the dent to palm oil output in Indonesia, the top producer of the vegetable oil, from dryness which saw plantations in southern Sumatra, a major growing region receive only 5-50% of normal rainfall in the July-to-October period.
“Indonesia is experiencing an El Nino event characterised by atypical dryness throughout much of its palm oil production regions,” the bureau said in a report.
“Field observations and industry sources confirm that production declines are stronger than typical dry season losses.
“El Nino is driving down yields.”
Growth spree stalls
The production decline is “expected to start in December”, and will “linger through the next year, depending on the severity and duration of the dryness”, the report said.
The bureau cut its forecast for palm oil output in 2015-16 to 33.0m tonnes, 2.0m tonnes below the USDA’s official estimate, and a figure in line with that last season.
Not since 1997-98, which witnessed the last severe El Nino, has Indonesian palm oil output failed to grow year on year.
However, the bureau stressed that unlike in 1997-98 – when production fell by some 7% year on year, making it the only season on USDA records going back 50 years to see a decline in volumes – output this time was being underpinned by improved oil palm cultivars and the number of young trees.
“Planting data indicates that new plantings reached near-peak levels in 2013, implying that production continues to rise as plantations reach full maturity,” the bureau said.
“Industry sources… stress that losses are not on par with yield declines experienced in 1997-98.”
The bureau’s production figure tallies with an estimate from Oil World last week that Indonesian output will hold steady in calendar year, meaning a figure of about 33.6m tonnes on its estimates.
However, James Fry, of LMC International, has forecast a drop of up to 9% in Indonesian palm oil output next season, because of El Nino-inspired dryness.
Dorab Mistry, another well-respected palm oil analyst, has forecast 1m-tonne increase in world production in 2016, to 63m tonnes.