Freshly harvested palm oil fruits at a plantation in Batang Toru, North Sumatra. (JG Photo/Nur Yasmin)

Palm Oil: Local Consumption Down, Export Picks Up During Pandemic

BY :NUR YASMIN

MAY 13, 2020

Jakarta. The Indonesian Palm Oil Association, or Gapki, has reported higher export of palm oil but lower domestic consumption of the commodity during the coronavirus pandemic.

Domestic consumption in March decreased by 3.2 percent – from 786,000 tons in February to 721,000 tons in March.

During the same period, local food consumption also fell by 8.3 percent, while sales of palm oil for oleochemical products rose by 14.5 percent.

"Palm oil consumption fell as food consumption fell. People are uncertain when the pandemic will be over. Meanwhile, hand sanitizer producers need more palm oil to ramp up production," Gapki director Mukti Sardjono said in a press release on Wednesday.

He said out of 68,000 tons of palm oil sold to the oleochemical industry, 55 percent was for hand sanitizers.

Palm oil export rose by 3.3 percent or 185,000 tons from 2.53 million tons in February to 2.72 million tons in March.

Meanwhile, CPO export rose by 113,000 tons from 524,000 tons in February.

Bangladesh, South Africa and the third-largest global palm oil consumer, China, were responsible for the highest export surges in the period. 

"The export surge to China started happening once they managed to get a handle on Covid-19," Mukti said.

Meanwhile, exports to Pakistan and the United States – the current global pandemic epicenter – had gone down. 

Exports to Europe, the Middle East and India were normal.

However, India had recently adopted import restrictions on refined palm oil products, which might put pressure on the industry later down the line.

The price of crude palm oil (CPO) also dropped from $722 per ton in February to $636 per ton in March, mainly thanks to lower food consumption as restaurants close up shops during the pandemic. 

Malaysian palm oil producers told Reuters on Tuesday the outlook for the industry this year is grim as a full recovery is not expected to happen until the last quarter next year. 

They said countries shifting to biodiesel might help to slow stock build-up.

Indonesia began mandatory use of B30 – diesel fuel made up of 30 percent biofuel from palm oil – last month and is already preparing to use the upgraded version, B40, starting in July 2021.

Mukti said palm oil production is still running normally despite the pandemic, but physical distancing is in place at factories.

"We have to improve productivity and efficiency to keep the industry viable," he said.

Dry season in most parts of Indonesia will start in May and peak in August, and drought is expected in several places. 

"People say it's not going to be as bad as last year's drought, but forest fires could still happen. Gapki has issued a forest fire prevention protocol to protect the plantations," Mukti said.

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