06/03/2014 (Jakarta Globe) -  Indonesia’s use of palm oil for blending into biodiesel is likely to fall 41 percent short of its target due to a rally in prices of the vegetable oil, a senior industry official said.

A lower palm oil take-up by the world’s top producer could help put a lid on benchmark prices that surged to a 17-month top of 2,860 ringgit ($870) on Monday amid crop damaging dry weather in Southeast Asia.

Indonesia is expected to use 2 million metric tons of palm oil for biodiesel in 2014, against the initial target of 3.4 million metric tons, said Fadhil Hassan, executive director of the Indonesian Palm Oil Association.

“It is difficult to realize all of it,” he told Reuters on the sidelines of an industry event in Kuala Lumpur on Wednesday. ”The problem is pricing.”

Jakarta’s energy ministry has raised the minimum bio content in diesel to 10 percent, up from levels of 3-10 percent. For the power industry, the minimum was doubled to 20 percent.

But there are concerns Indonesia will find it hard to meet its timetable to burn more palm-based biodiesel, hampered by the demands of distributing the fuel to its thousands of islands and by reluctance to fill up tanks with biofuel.

Pertamina has secured 2.4 million metric tons of palm biodiesel for 2014, although the Indonesian state energy company will be able to use only 2 million metric tons, Hassan said.

Indonesia is, however, set to emerge as the world’s biggest consumer of palm oil this year, using more than 9 million metric tons, industry officials said.

The country is likely to finish 2014 with ending stocks of 1.8 million metric tons, compared with an estimated 1.8 to 2.2 million metric tons at the end of 2013, Hassan said.

He also said that palm oil prices, which are currently trading at 2,847 ringgit, have been underpinned by dry weather in large parts of Southeast Asia.

“It’s been dry for the past 1-2 months in Sumatra, where 70 percent of the oil palm production comes from,” he said.