As per the latest update from United States Department of Agriculture (USDA), Indonesia palm oil production is forecast to reach 43 million tons in 2019/20, a 1.5 million ton increase from 2018/19. The rate of increase is expected to slow to 3.75 percent following two years of higher yields after the 2015/16 El-Nino, which caused a sharp decline in yields in both Sumatra and Kalimantan. Weather agencies forecast no extreme dryness in these key production areas, further suggesting positive production conditions during 2019/20. Mature palm area is forecast to grow to 11.75 million ha in 2019/20. Based on seeds sales information, no change in planted area is forecast. Other publicly available information projects an increase in planted area, but this would be inconsistent with known seed sales information. Future adjustments to planted area must await availability of more reliable information. The significant decline in crude palm oil (CPO) prices during the latter half of 2018/19 could result in lower yields as both large and smallholder plantations reduce fertilizer applications. Additionally, the lower prices are likely to reduce the total number of re-plantings as plantations look for ways to trim operating costs. Palm oil exports are forecast to increase from 29 million tons in 2018/19 to 30 million tons in 2019/20, as increasing demand from China, Pakistan and Africa offset weakening exports to India, where duties for CPO and RPO remain 40 and 50 percent, respectively. Powered by Commodity Insights
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