MUMBAI, Sept 19 — Indonesia’s palm oil exports are expected to decline this year due to increased domestic consumption because of a higher biodiesel blending mandate and a slight decrease in production, an industry official told Reuters today.

Lower output in the world’s biggest producer of the tropical oil would limit exports and support benchmark Malaysian prices.

The country’s exports could fall 2 million metric tons to 30.2 million tons in 2024 from a year ago, said Fadhil Hasan, head of the trade and promotion division at the Indonesian Palm Oil Association said on the sidelines of the ‘Globoil’ conference in Mumbai.

In the first half of 2024, exports fell 7.6 per cent to 15.06 million tons, he said.

Production is likely to drop by 1 million tons to 53.8 million tons as last year’s dry weather is lowering yields, he said.

"There has been neither an improvement in productivity this year nor an expansion in area. We anticipate that this year will result in a reduction of production by 1 million tons.”

Production fell to 26.2 million tons in the first half, from 27.3 million tons last year, according to GAPKI.

"Even if we assume that production in the second half remains at last year’s level, we will still end the year with lower output,” Hasan said.

Indonesia increased the share of palm oil blended into biodiesel to 35 per cent in 2023 and implemented it nationwide from Aug. 1, 2023.

This would lift palm oil consumption to a record 24.2 million tons in 2024 from 23.2 million tons last year, he said.

Last month, Indonesia’s energy ministry said it plans to raise the blending to 40 per cent in January 2025, in an effort to reduce fuel imports and emissions from fossil fuels.

The rising consumption is set to reduce surplus for exports, which helps Jakarta raise funds to implement its biodiesel programme, Hasan said.

"The government should carefully consider trends in production and exports before increasing the blending mandate. Exports generate revenue that supports the biodiesel program.” — Reuters