Palm oil output in major Indonesian production region likely to fall

JAKARTA: Palm oil output in the major producing region of Kalimantan in Indonesia could fall by 12percent to 15percent in the fourth quarter, with plantations hit by prolonged dry weather and widespread fires, an analyst said on Wednesday.

Indonesia, the world’s largest palm oil producer and exporter, is battling its worst wildfires in 11 years, with forests and peatland parched by El Niño-linked drought conditions. “After an estimated 11percent to 12percent decline in August, output could fall by 12percent to 15percent in October to December as Kalimantan had experienced very dry conditions over the past two months, particularly in Central and West Kalimantan,” Cheang Kang Wei, agricultural commodities analyst at the Singapore-based StoneX brokerage, told Reuters.

Kalimantan on the island of Borneo accounts for more than a third of Indonesia’s palm oil output and has been the hardest hit by wildfires in recent weeks.

Central and West Kalimantan provinces account for around 13percent and 14percent of Indonesia’s palm oil production respectively. Together with East Kalimantan, a major contributor to last year’s production growth, the three provinces account for around 36percent of total national output, Cheang said.

From January to July this year, fires burned around 202,000 hectares (almost 500,000 acres) of land across the country, government figures show, and another 600,000 hectares were damaged in August alone as the fires intensified, according to estimates from environmental group YKAN.

Eddy Martono, chairman of the Indonesian Palm Oil Association, also known as GAPKI, told Reuters that the damage done by the fires could weigh on palm oil production for some time. “Fire-damaged oil palms could die or suffer stress and take about three years to recover,” he said.

GAPKI has revised down its palm oil output estimates for 2026 by 2.9percent because of the fires, though production will still be higher than last year as new estates begin production.