Indonesia to double palm oil production by 2020

Indonesia to double palm oil production by 2020

AFP: 28 May 2009

JAKARTA (AFP) — Indonesia aims to more than double its crude palm oil output to 40 million tonnes by 2020 through increased yields and more plantations, officials said Wednesday.

Average oil palm plantation yields would increase from 3.5 tonnes to 4.5 tonnes a hectare while land under plantation would expand from 7.9 million hectares (19.5 million acres) to about 10 million, they said.

Plans to expand palm oil plantations have been opposed by environmental groups, who say Indonesia’s forests are vital carbon sinks in the fight against climate change and an irreplaceable source of biodiversity.

But officials say another 3.4 million hectares of carbon-rich peatlands have been set aside for future plantations, while forest land available for development stands at 10.1 million hectares.

That is around the size of Greece, or 20 times the size of neighbour Singapore.

Companies will be able to develop plantations on peatland areas this year after the government lifted a one-year freeze on peatland conversion imposed after protests from environmental groups.

Indonesian Palm Oil Board chairman Franky Widjaja told Dow Jones Newswires on the sidelines of a palm oil conference in Jakarta that higher yields meant fewer plantations would be required.

“Around 40 percent of our plantations are run by smallholders whose yields fall below three tonnes (a hectare). There’s much room for improvement when it comes to such plantations,” he said.

“If we can achieve at least a yield of four tonnes a hectare we would only need total plantation land of 10 million hectares.”

Indonesia, the world’s largest producer of crude palm oil (CPO), is expected to produce 19 to 20 million tonnes of the commodity this year.

Palm oil is used in everything from biscuits to soups, cosmetics and biofuel.

Bayu Krisnamurthi, a deputy to the coordinating minister for the economy, said there was a danger that large increases in CPO output might result in oversupply.

“The rising price of CPO over recent years has prompted more smallholder farmers to switch to planting oil palm from other crops such as coffee and rubber,” he said.

He said a balance had to be struck between production and demand, and industries such as biodiesel should be encouraged to ensure there was a market for expanded CPO production.

The biodiesel industry has been lobbying the government for a subsidy on the low-pollution fuel in order to cut production costs and make the industry viable in the face of falling crude oil prices and rising feedstock prices.

Krisnamurthi said Indonesia aimed to use 40 percent of its CPO for energy production, 30 percent for food and the remainder for other purposes such as cosmetics by 2020.

— Dow Jones Newswires contributed to this story —

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