Palm oil output in the world's top producer Indonesia will be little changed next year as weather fluctuations disrupt production, while higher demand will boost prices, an official at plantation giant PT Astra Agro Lestari said.
Indonesia is forecast to produce about 23 million tonnes of palm oil in 2011, but extreme weather will limit gains next year, Joko Supriyono, a director at one of Indonesia's largest listed plantation firms told Reuters on Monday. Last year, Indonesia produced around 21.6 million tonnes of palm oil.
"Experts say there will be La Nina next year, meaning more rain," said Supriyono, speaking ahead of the 7th Annual Indonesian Palm Oil Conference this week. "Usually more rain negatively impacts ... less rain also negatively impacts production," said Supriyono
Palm oil investor sentiment has improved in recent weeks, due to lower production expectations from the fourth quarter, as dominant Southeast Asian producers enter the rainy season and the La Nina weather pattern is seen returning.
But Supriyono, who is also the secretary general of the Indonesian Palm Oil Association (Gapki), expects Indonesian production in the final quarter to be firm - leading to flat benchmark prices. "In general demand of vegetable oils is very tight," said Supriyono. "Incremental demand is higher than incremental supply ... the price will increase," he added on the 2012 outlook, without giving any price estimate. Malaysian palm oil futures hit a two-week low on Friday, closing down more than 1 percent at 3,069 ringgit ($964) per tonne.
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