Indonesian Palm Oil Exports To Grow Despite Sales Halt: Industry

Fitri Wulandari, PlanetArk 15 Apr 10;

Indonesian Palm Oil Exports To Grow Despite Sales Halt: Industry Photo: Beawiharta
Aerial view of a palm oil plantation in Pelalawan, Indonesia's Riau province November 9, 2009.
Photo: Beawiharta

A decision by top palm oil buyers to halt purchases from Indonesia is unlikely to affect palm oil exports from Southeast Asia's biggest economy given strong demand, an industry official said on Wednesday.

Unilever, the world's top palm oil buyer, which uses palm oil in such products as Dove soap and Ben & Jerry ice cream, canceled its annual 20 million pound ($32 million) contract with PT SMART, part of Indonesia's Sinar Mas group, in December.

It said it was up to Sinar Mas to prove that none of its plantations were contributing to the destruction of rain forests.

Another top palm oil buyer, Nestle, also stopped buying palm oil from Sinar Mas after Greenpeace released a report alleging the planter cleared rainforests.

Green groups say oil palm expansion at the expense of rainforests and peatlands releases vast amounts of greenhouse gases into the atmosphere and speeds up global warming.

"Everybody needs palm oil. If there is a moratorium to stop buying palm oil, there will be a shortage of palm oil supply in the world," Joko Supriyono, secretary general of Indonesian Palm Oil Association (GAPKI), told reporters.

"I think exports will not be affected because global demand for palm oil is also exceeding supply," Supriyono said.

The Indonesian Palm Oil Association has maintained its forecast for Indonesia's palm oil exports to grow 16 percent to 18 million tonnes this year on strong demand from India and China.

Indonesia relies on overseas markets, mainly India and China, to buy about 70 percent of its palm oil output, which is estimated to hit 23 million tonnes this year.

"Our domestic consumption is also very slow to grow. So we don't have any choice but to export the excess production," Supriyono said.

Analysts have said top palm oil buyers halting supply contracts with Sinar Mas and other planters in the future could limit plantation expansion as global food and fuel demand grows.

Global palm oil consumption in April/September 2010 is forecast to rise to 23.98 million tonnes from 22.50 million tonnes in the same year-ago period, Hamburg-based oilseeds analysts Oil World forecast last month.

(Editing by Sara Webb)