Indonesian 2026/27 palm oil production forecast to rise 3% to 48M tonnes
Indonesia’s palm oil output is forecast to rise 3% to 48 million tonnes in 2026/27, driven by maturing plantations and better seeds. However, limited expansion, slow replanting, adverse weather, and policy actions may curb growth. Strong biodiesel demand, rising exports, and higher domestic consumption are expected to tighten stocks.
Palm oil production in Indonesia is forecast to increase by 3% in 2026/27 to 48M tonnes, up from 46.7M tonnes the previous year, according to a US Department of Agriculture (USDA) report.
The projected increase was driven by trees planted between 2021 and 2024 reaching maturity and the wider use of higher-yielding seed varieties, the USDA’s 15 April ‘Indonesia – Oilseeds and Products Annual’ said.
“Despite these positive factors, expansion of plantations into new areas remained limited throughout 2025,” the USDA said.
Seed sales had continued to rise, resulting in a greater proportion of land classified as immature – areas where young palm trees had been planted but were not old enough to bear fruit, the report said.
“Over the past five years, the total area classified as immature has increased by more than 60%, while the annual expansion of planted areas has consistently stayed below 150,000ha,” the USDA said.
In addition, the national smallholder replanting programme had not met its targets, consistently replanting less than 50,000ha/year since 2021, while private companies had been more active in replanting efforts, with most expansion taking place within existing, unused concession areas, the report said.
“Production growth is also expected to be constrained by weather conditions during the remainder of 2026, which could adversely impact yields,” the USDA said.
“Indonesia’s weather agency (BMKG) forecast an earlier than-normal onset of the 2026 dry season, with below-normal rainfall and a prolonged duration, potentially leading to intense heat and drought conditions across many regions.”
Previous prolonged drought related to El Niño events in 2015 and 2023 caused water shortages that lowered palm production in several regions.
“The government’s confiscation of illegal plantations in 2025, affecting both smallholders and private operators, is expected to impact 2025/26 production due to the discontinuation of essential farm inputs, such as fertilisers, and the destruction of certain plantations,” the USDA said.
If these measures persisted, production declines could continue into 2026/27.
Fertiliser use on most private plantations was expected to remain at recommended levels, supporting yield improvements.
Palm oil consumption was forecast to grow by 2% from 22.7M tonnes in 2025/26 to 23.1M tonnes, based on continued industrial demand and a marginal increase in food sector consumption.
With the Indonesian government carrying out road tests for B50 biodiesel, which were scheduled for completion in June, its implementation was expected to require 20bn litres/year of palm biodiesel, while B40 utilisation in 2025 required 14.2bn litres/year.
“Indonesia’s industrial palm production capacity has grown rapidly over the past decade. In early 2026, biodiesel production capacity reached 22bn litres, an increase of 2bn litres from last year,” the USDA said.
According to Indonesia’s biodiesel producers’ association, an additional 2bn-3bn litres of production capacity would be required to facilitate Indonesia’s B50 blending mandate target.
Indonesia’s 2026/27 palm oil exports were forecast at 25M tonnes, a 4% increase compared to the previous year, due to continued demand from major markets such as China and South Asian countries.
“Demands from major markets such as China, India and Pakistan remain strong considering price competitiveness with other vegetable oils,” the USDA said.
Palm oil stocks in 2026/27 were forecast to fall by 3% to 4.3M tonnes, driven by higher domestic consumption and increased exports.
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Source : OFI Magazine
