The Deputy Chairman of the Indonesian Association of Palm Oil Producers (GAPKI), Togar Sitanggang, believes that oil palm prices that have recently been on a recovery from years of low, will continue to increase in 2020 as palm oil stocks and production in Indonesia, the world’s top palm oil producer, will be low.
“The way I see the conditions in 2020 is that stocks are low and production not enough. This is given,” Togar said in an interview aired by CNBC Indonesia television last week.
He said that while production increase in 2020 was only estimated at three million tons while the increase in domestic demand for biodiesel would also reach three tons, canceling any addition. The food sector, he added, is estimated to draw another one million tons from existing stocks.
“This will result in stocks in 2020 to be just enough and therefore there is the possibility that at certain times, there will be fighting over (supply,)” he said adding that oil palm harvests were uneven through the year, with low harvest in the first half and higher ones in the second half of the year,
“Prices will rise because of this fighting over (supply,)” he said, explaining that trading companies or processors would seek to buy as much stock as possible to make sure that their operation could continue.
He said there was nothing much that could be done to address this shortage as new planting would need two to three years to begin production while boosting productivity would also need at least one year before results could be felt.
The one who will be able to “smile” next year, Togar said, would-be producers, including farmers, as oil palm prices would keep rising next year.
Read more from Bhimanto Suwastoyo.
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