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Indonesia 2016 Palm Oil Output May Fall on El Nino -Industry Group
Indonesia 2016 Palm Oil Output May Fall on El Nino -Industry Group
10/03/2016 (Reuters) - Indonesia's palm oil output is expected to fall to about 32.1 million tonnes this year, which would be the first decline since 1998, as a drought caused by the El Nino weather pattern limits production, an industry group said.
Lower output could support benchmark palm oil futures that are currently trading at about 2,551 ringgit ($618) per tonne. Palm has risen 1.8 percent this week after reaching a one-month low of 2,470 ringgit on Thursday.
"There will be a drop in production this year considerably, even after taking into account new harvest crops of 2016," Fadhil Hasan, executive director of the Indonesian Palm Oil Association (GAPKI), told Reuters on March 8.
The latest forecast is down from a previous outlook of 35 million tonnes of production in 2016.
The world's top producer of palm oil produced 32.5 million tonnes of palm oil in 2015. An output decline of 1.2 percent for 2016 would be the first production drop since the 1998 crop year, according to U.S. Department of Agriculture data.
The El Nino weather phenomenon brings drought across Southeast Asia, impacting palm oil fruit yields and lowering production. Industry groups had earlier forecast that recent rains would soften the impact of the El Nino, improving output prospects.
Hasan has raised his outlook for palm oil prices on the lower expected output, forecasting an annual average of 2,600 ringgit for 2016. This is higher than an earlier projection at 2,450-2,550 ringgit for the year. Palm oil futures averaged 2,275 ringgit in 2015.
Indonesian exports may drop to about 23 million to 24 million tonnes in 2016, the first decline in five years, due to higher domestic biodiesel use, said Hasan.
Indonesia raised biodiesel subsidies and the minimum bio content in diesel fuel to 20 percent this year to cut its oil import bill and soak up supplies of crude palm oil.
"The Chinese economy this year is going to be slower than before, so that will affect our exports," Hasan said, adding that other factors limiting exports are the potential implementation of palm oil import taxes by France and Russia, and increased import tariffs by India.
France is proposing an import tax on palm oil and palm kernel oil of 300 euros ($329) per tonne in 2017, rising to 900 euros per tonne by 2020, while Russia's excise tax on palm oil could be introduced on July 1 and would be about $200 per tonne.
India raised its import taxes on crude and refined edible oils by 5 percentage points in September in a bid to become self-sufficient in edible oils. ($1 = 4.1250 ringgit) ($1 = 0.9113 euros)
Lower output could support benchmark palm oil futures that are currently trading at about 2,551 ringgit ($618) per tonne. Palm has risen 1.8 percent this week after reaching a one-month low of 2,470 ringgit on Thursday.
"There will be a drop in production this year considerably, even after taking into account new harvest crops of 2016," Fadhil Hasan, executive director of the Indonesian Palm Oil Association (GAPKI), told Reuters on March 8.
The latest forecast is down from a previous outlook of 35 million tonnes of production in 2016.
The world's top producer of palm oil produced 32.5 million tonnes of palm oil in 2015. An output decline of 1.2 percent for 2016 would be the first production drop since the 1998 crop year, according to U.S. Department of Agriculture data.
The El Nino weather phenomenon brings drought across Southeast Asia, impacting palm oil fruit yields and lowering production. Industry groups had earlier forecast that recent rains would soften the impact of the El Nino, improving output prospects.
Hasan has raised his outlook for palm oil prices on the lower expected output, forecasting an annual average of 2,600 ringgit for 2016. This is higher than an earlier projection at 2,450-2,550 ringgit for the year. Palm oil futures averaged 2,275 ringgit in 2015.
Indonesian exports may drop to about 23 million to 24 million tonnes in 2016, the first decline in five years, due to higher domestic biodiesel use, said Hasan.
Indonesia raised biodiesel subsidies and the minimum bio content in diesel fuel to 20 percent this year to cut its oil import bill and soak up supplies of crude palm oil.
"The Chinese economy this year is going to be slower than before, so that will affect our exports," Hasan said, adding that other factors limiting exports are the potential implementation of palm oil import taxes by France and Russia, and increased import tariffs by India.
France is proposing an import tax on palm oil and palm kernel oil of 300 euros ($329) per tonne in 2017, rising to 900 euros per tonne by 2020, while Russia's excise tax on palm oil could be introduced on July 1 and would be about $200 per tonne.
India raised its import taxes on crude and refined edible oils by 5 percentage points in September in a bid to become self-sufficient in edible oils. ($1 = 4.1250 ringgit) ($1 = 0.9113 euros)