04/11/2008 (Reuters), Jakarta - Stocks of crude palm oil in Indonesia, the world's largest producer of the commodity, could swell 67 percent this year, boosted by higher output and defaults by foreign buyers, an industry official said on Tuesday.

"I am looking at a stock level of around 1.9-2.0 million tonnes by the year-end. It is around 800,000 tonnes bigger than last year," Akmaluddin Hasibuan, chairman of the Indonesia Palm Oil Producers Association (GAPKI), told Reuters by telephone.

Stock levels hit 2.4 million tonnes in October because of the defaults, but had gradually declined to about 2 million tonnes as export shipments had resumed, Hasibuan added.

Exports this year may fall short of the association's previous estimate of 14 million tonnes after buyers from India and China cancelled some contracts due to a fall in prices, he said.

At least 20 buyers from India defaulted, but could not confirm the volume of defaults, he said.

"We have sent letters to the Indian government and industry association, complaining about defaults. They did not even want to renegotiate prices," Hasibuan added."Exports may be just flat from last year's figure of around 13 million tonnes."

To boost exports, the Indonesian government has scrapped its tax on exports of crude palm oil, which had been set at 2.5 percent for November.

Indonesia produced 17.18 million tonnes of crude palm oil in 2007, of which the domestic market took 3.8 million tonnes. The output is projected to rise to 18.6 million tonnes this year.

Palm oil -- which is used to make products from soap to biodiesel -- has lost more than 60 percent of its value from its record level of 4,486 ringgit a tonne struck in March.

Falling crude oil prices, weak global demand, defaults by buyers and a build-up in stocks in both Indonesia and rival Malaysia have been blamed for the palm price falls.

Hasibuan said he believed that buyers cancelled contracts mainly due to price falls, rather than falling demand.

He said the recent recovery in global financial markets should also lend support to demand into next year.