What Is The Role of Palm Oil Production in Indonesia's Economy?
Palm oil is one of the world's most produced and consumed oils. This cheap, production-efficient and highly stable oil is used in a wide variety of food, cosmetic and hygiene products, and can be used as source for bio-fuel or biodiesel. Most palm oil is produced in Asia, Africa and South America because the trees require warm temperatures, sunshine and plenty of rain in order to maximize production.
Palm oil production is important to the economy of Indonesia as the country is the world's biggest producer and consumer of the commodity, providing about half the world supply. Production of palm oil in Indonesia has, since 1964, recorded a phenomenal increase from 157, 000 tonnes to 33.5 million tonnes in 2014.Palm oil accounts for 11% of Indonesia's export earnings of $5.7bn. Maintaining its status as the world’s largest producer of palm oil, Indonesia has projected a figure of 40 million tonnes by 2020.
The entire production of the oil is derived from Indonesia's rainforest which ranks third in the world, the other two being in the Amazon and Congo basins. According to the Indonesian Palm Oil Association, one third of this production is attributed to smallholder farmers and the remaining to the multinationals. Palm trees that were planted about 25 years ago have an annual average production rate of four tonnes of oil per hectare and now there are plans to increase this by introducing newer varieties which could double the production rate per hectare.
Borneo and Sumatra are the two islands which account for 96 percent of Indonesia’s palm oil production.As of 2011, area under oil palm plantations was 7.8 million hectares of out of which 6.1 million ha were productive plantations under harvest and thus Indonesia has become the global leader in crude palm oil (CPO) production. According to the World Bank reports nearly 50% of CPO produced in the country is exported in an unprocessed form, while the remaining is subject to processing into cooking oil out of which about 50% is exported and the balance consumed is locally.
A negative side-effect of palm oil production - apart from its impact on people's health due to the high level of saturated fat - is that the palm oil business is a key driver of deforestation in countries such as Indonesia and Malaysia. Indonesia is the world's largest producer and exporter of palm oil but it is also the largest greenhouse gas emitter after China and the United States.
Global palm oil production is dominated by Indonesia and Malaysia. These two countries, together, account for around 85 to 90 percent of total global palm oil production. Indonesia is the largest producer and exporter of palm oil worldwide.
Over the long term, global palm oil demand shows an increasing trend as an expanding global population gives rise to rising consumption of food and cosmetic products that contain some sort of material that is derived from palm oil. Meanwhile, various governments across the globe encourage the use of biofuel.
Global Palm Oil Production in 2016:
Source:Index Mundi
Palm oil production is important to the economy of Indonesia as the country is the world's biggest producer and consumer of the commodity, providing about half the world supply. Production of palm oil in Indonesia has, since 1964, recorded a phenomenal increase from 157, 000 tonnes to 33.5 million tonnes in 2014.Palm oil accounts for 11% of Indonesia's export earnings of $5.7bn. Maintaining its status as the world’s largest producer of palm oil, Indonesia has projected a figure of 40 million tonnes by 2020.
The entire production of the oil is derived from Indonesia's rainforest which ranks third in the world, the other two being in the Amazon and Congo basins. According to the Indonesian Palm Oil Association, one third of this production is attributed to smallholder farmers and the remaining to the multinationals. Palm trees that were planted about 25 years ago have an annual average production rate of four tonnes of oil per hectare and now there are plans to increase this by introducing newer varieties which could double the production rate per hectare.
Borneo and Sumatra are the two islands which account for 96 percent of Indonesia’s palm oil production.As of 2011, area under oil palm plantations was 7.8 million hectares of out of which 6.1 million ha were productive plantations under harvest and thus Indonesia has become the global leader in crude palm oil (CPO) production. According to the World Bank reports nearly 50% of CPO produced in the country is exported in an unprocessed form, while the remaining is subject to processing into cooking oil out of which about 50% is exported and the balance consumed is locally.
A negative side-effect of palm oil production - apart from its impact on people's health due to the high level of saturated fat - is that the palm oil business is a key driver of deforestation in countries such as Indonesia and Malaysia. Indonesia is the world's largest producer and exporter of palm oil but it is also the largest greenhouse gas emitter after China and the United States.
Global palm oil production is dominated by Indonesia and Malaysia. These two countries, together, account for around 85 to 90 percent of total global palm oil production. Indonesia is the largest producer and exporter of palm oil worldwide.
Over the long term, global palm oil demand shows an increasing trend as an expanding global population gives rise to rising consumption of food and cosmetic products that contain some sort of material that is derived from palm oil. Meanwhile, various governments across the globe encourage the use of biofuel.
Global Palm Oil Production in 2016:
| Country | Production(in metric tons) |
| Indonesia | 36,000,000 |
| Malaysia | 21,000,000 |
| Thailand | 2,200,000 |
| Colombia | 1,320,000 |
| Nigeria | 970,000 |
| World | 58,800,000 |
PALM OIL IN INDONESIA
Indonesian Palm Oil Production and Export
Few Indonesian industries have shown such robust growth as the domestic palm oil industry during the past 20 years. This growth is reflected by the country's rapidly rising production and export figures as well as by the growing quantity of its palm oil estate area. Driven by increased global demand and higher yields, palm oil cultivation has been expanded significantly by Indonesian farmers and conglomerates (at the expense of the environment and at the expense of production figures of other agricultural products such as cocoa or coffee because farmers switched to palm oil plantation due to the promising perspectives).
The majority of Indonesia's palm oil output is exported. The most important export destination countries are China, India, Pakistan, Malaysia, and the Netherlands. Although the numbers are very insignificant, Indonesia also imports some palm oil, primarily from India.
Indeed, the majority of Indonesian palm oil is exported (see table below). However, due to Indonesia's expanding population (as well as rapidly expanding middle class) and the government's support for biodiesel, domestic palm oil demand in Indonesia is growing as well. Rising domestic palm oil demand could in fact mean that crude palm oil (CPO) shipments from Indonesia will stagnate in the years ahead if the government remains committed to the moratorium on conversion of peat-land (read more below).
Indonesian Palm Oil Production and Export Statistics:
Sources: Indonesian Palm Oil Producers Association (Gapki) & Indonesian Ministry of Agriculture
The table above shows production of palm oil has grown rapidly in Indonesia over the past decade. The Indonesian Palm Oil Association (Gapki) stated that its target is to see Indonesia producing at least 40 million tons of CPO per year from 2020.
Indonesia's oil palm plantation and processing industry is a key industry to the country's economy: the export of palm oil is an important foreign exchange earner while the industry provides employment opportunities to millions of Indonesians. In terms of agriculture, palm oil is the most important industry of Indonesia contributing between 1.5 - 2.5 percent of the nation's gross domestic product (GDP).
In terms of geography, Riau (Sumatra) is the leading palm oil producer in Indonesia, followed by North Sumatra, Central Kalimantan, South Sumatra, and West Kalimantan.
According to data from Indonesia's Statistics Agency (BPS) the total area of oil palm plantations in Indonesia is currently around 11.3 million hectares; a figure that is nearly three times as much as in the year 2000 when around four million hectares of Indonesian soil was used for palm oil plantations. This figure is expected to increase to 13 million hectares by the year 2020.
State-owned enterprises play a very modest role in the Indonesian palm oil sector as they own relatively few plantations. Meanwhile, big private enterprises (for example, the Wilmar Group and Sinar Mas Group) are dominant, producing slightly over half of total Indonesian palm oil output. Smallholder farmers account for around 40 percent of total production. However, most of these smallholder farmers are highly vulnerable to global downswings in palm oil prices as they cannot enjoy the cash reserves (or bank loans) that the big planters have at their disposal.
Who Own the Palm Oil Plantations in Indonesia?
Big Indonesian companies (for example Unilever Indonesia) have invested heavily in recent years to expand palm oil refining capacity. This is in line with the government's ambition to extract more revenue from Indonesia's natural resources. The country has always been mainly focused (and dependent) on the export of raw palm oil (and other raw commodities) but over the past decade authorities have shifted their priority to refined products, higher up in the value chain, which also form a buffer in times of sliding palm oil prices. Palm oil refining capacity in Indonesia is understood to have jumped to (an annual) 45 million tons by the start of 2015, up from an 30.7 million in 2013, and more than double the 21.3 million in 2012.
Future Prospects of the Indonesian Palm Oil Industry
The 2000s commodities boom was a blessing for Indonesia due to the country's abundance of natural resources. Palm oil prices rose steeply after 2005 but the global crisis led to a sharp decline in CPO prices in 2008. There emerged a solid rebound, but after 2011 CPO prices fell to low territory again, particularly as demand from China dropped, while low petroleum prices (since mid-2014) curtail demand for palm-based biofuels. As such, the palm oil industry's prospects are gloomy for the foreseeable future, especially as Indonesia is still too dependent on crude palm oil, instead of refined palm oil products. On the other hand, considering the government is eager to curb expansion of palm oil plantations, existing palm oil players become more valuable.
Regarding the long term the palm oil industry remains lucrative for the following reasons:
• Big profit margins, while the product is simple to produce.
• Large and increasing international demand
• Crude palm oil (CPO) production costs in Indonesia are the lowest worldwide
• Higher rates of productivity compared to other edible oil products
• Bio-fuel is expected to increase its significance at the expense of gasoline
What are matters that hamper development of Indonesia's palm oil industry?
• Awareness of the need for more environment-friendly policies
• Land disputes with local communities due to a lack of clarity regarding land ownership
• Indonesia is known for its legal and regulatory uncertainty
• High logistics cost due to the lack of quality and quantity of infrastructure
How to Get in Touch with Zhengzhou Double lion Flour Mill Manufacturer
Email: info@zzdoublelion.com
Whatsapp: +8613849022317 (Sophia)
Wechat: +8613849022317 (Sophia)
Add:Lotus street NO.100,Hi-tech development zone, Zhengzhou, Henan, China.
Few Indonesian industries have shown such robust growth as the domestic palm oil industry during the past 20 years. This growth is reflected by the country's rapidly rising production and export figures as well as by the growing quantity of its palm oil estate area. Driven by increased global demand and higher yields, palm oil cultivation has been expanded significantly by Indonesian farmers and conglomerates (at the expense of the environment and at the expense of production figures of other agricultural products such as cocoa or coffee because farmers switched to palm oil plantation due to the promising perspectives).
The majority of Indonesia's palm oil output is exported. The most important export destination countries are China, India, Pakistan, Malaysia, and the Netherlands. Although the numbers are very insignificant, Indonesia also imports some palm oil, primarily from India.
Indeed, the majority of Indonesian palm oil is exported (see table below). However, due to Indonesia's expanding population (as well as rapidly expanding middle class) and the government's support for biodiesel, domestic palm oil demand in Indonesia is growing as well. Rising domestic palm oil demand could in fact mean that crude palm oil (CPO) shipments from Indonesia will stagnate in the years ahead if the government remains committed to the moratorium on conversion of peat-land (read more below).
Indonesian Palm Oil Production and Export Statistics:
| 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |
| Production (million tons) | 19.2 | 19.4 | 21.8 | 23.5 | 26.5 | 30.0 | 31.5 | 32.5 | 32.0 |
| Export (million tons) | 15.1 | 17.1 | 17.1 | 17.6 | 18.2 | 22.4 | 21.7 | 26.4 | 27.0 |
| Export (in Usd billion) | 15.6 | 10.0 | 16.4 | 20.2 | 21.6 | 20.6 | 21.1 | 18.6 | 18.6 |
Sources: Indonesian Palm Oil Producers Association (Gapki) & Indonesian Ministry of Agriculture
The table above shows production of palm oil has grown rapidly in Indonesia over the past decade. The Indonesian Palm Oil Association (Gapki) stated that its target is to see Indonesia producing at least 40 million tons of CPO per year from 2020.
Indonesia's oil palm plantation and processing industry is a key industry to the country's economy: the export of palm oil is an important foreign exchange earner while the industry provides employment opportunities to millions of Indonesians. In terms of agriculture, palm oil is the most important industry of Indonesia contributing between 1.5 - 2.5 percent of the nation's gross domestic product (GDP).
In terms of geography, Riau (Sumatra) is the leading palm oil producer in Indonesia, followed by North Sumatra, Central Kalimantan, South Sumatra, and West Kalimantan.
According to data from Indonesia's Statistics Agency (BPS) the total area of oil palm plantations in Indonesia is currently around 11.3 million hectares; a figure that is nearly three times as much as in the year 2000 when around four million hectares of Indonesian soil was used for palm oil plantations. This figure is expected to increase to 13 million hectares by the year 2020.
State-owned enterprises play a very modest role in the Indonesian palm oil sector as they own relatively few plantations. Meanwhile, big private enterprises (for example, the Wilmar Group and Sinar Mas Group) are dominant, producing slightly over half of total Indonesian palm oil output. Smallholder farmers account for around 40 percent of total production. However, most of these smallholder farmers are highly vulnerable to global downswings in palm oil prices as they cannot enjoy the cash reserves (or bank loans) that the big planters have at their disposal.
Who Own the Palm Oil Plantations in Indonesia?
Big Indonesian companies (for example Unilever Indonesia) have invested heavily in recent years to expand palm oil refining capacity. This is in line with the government's ambition to extract more revenue from Indonesia's natural resources. The country has always been mainly focused (and dependent) on the export of raw palm oil (and other raw commodities) but over the past decade authorities have shifted their priority to refined products, higher up in the value chain, which also form a buffer in times of sliding palm oil prices. Palm oil refining capacity in Indonesia is understood to have jumped to (an annual) 45 million tons by the start of 2015, up from an 30.7 million in 2013, and more than double the 21.3 million in 2012.
The 2000s commodities boom was a blessing for Indonesia due to the country's abundance of natural resources. Palm oil prices rose steeply after 2005 but the global crisis led to a sharp decline in CPO prices in 2008. There emerged a solid rebound, but after 2011 CPO prices fell to low territory again, particularly as demand from China dropped, while low petroleum prices (since mid-2014) curtail demand for palm-based biofuels. As such, the palm oil industry's prospects are gloomy for the foreseeable future, especially as Indonesia is still too dependent on crude palm oil, instead of refined palm oil products. On the other hand, considering the government is eager to curb expansion of palm oil plantations, existing palm oil players become more valuable.
Regarding the long term the palm oil industry remains lucrative for the following reasons:
• Big profit margins, while the product is simple to produce.
• Large and increasing international demand
• Crude palm oil (CPO) production costs in Indonesia are the lowest worldwide
• Higher rates of productivity compared to other edible oil products
• Bio-fuel is expected to increase its significance at the expense of gasoline
What are matters that hamper development of Indonesia's palm oil industry?
• Awareness of the need for more environment-friendly policies
• Land disputes with local communities due to a lack of clarity regarding land ownership
• Indonesia is known for its legal and regulatory uncertainty
• High logistics cost due to the lack of quality and quantity of infrastructure
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Type: palm oil processing line, palm oil processing machine, palm oil mill plant, palm oil mill process, Get in touch with us. How to Get in Touch with Zhengzhou Double lion Flour Mill Manufacturer
Email: info@zzdoublelion.com
Whatsapp: +8613849022317 (Sophia)
Wechat: +8613849022317 (Sophia)
Add:Lotus street NO.100,Hi-tech development zone, Zhengzhou, Henan, China.
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