Palm oil production in Indonesia

Palm oil production is important to the economy of Indonesia as the country is the world's biggest producer and consumer of the commodity, providing about half of the world's supply.Oil palm plantations stretch across 6 million hectares (roughly twice the size of Belgium). Indonesia plans by 2015 to add 4 million additional hectares destined to oil palm biofuel production. As of 2012, Indonesia produces 35% of the world's certified sustainable palm oil (CSPO).

In addition to servicing traditional markets, Indonesia is looking to put more effort into producing biodiesel. China and India are the major importers of palm oil, accounting for more than a third of global palm oil imports.

Production of palm oil in Indonesia has, since 1964, recorded a phenomenal increase from 157, 000 tonnes to 33.5 million tonnes in 2014. Palm oil accounts for 11% of Indonesia's export earnings of $5.7bn. Maintaining its status as the world’s largest producer of palm oil, Indonesia has projected a figure of 40 million tonnes by 2020. In this context, the global production figure given by the Food and Agricultural Organization (FAO) was 50 million tonnes for 2012, equivalent to double of the 2002 production. This increase is also reflected in increases of Indonesia’s production of palm oil for the same period, from 10.300 million tonnes in 2002 and 28.50 million tonnes in 2012.

The entire oil production is derived from Indonesia's rainforest which ranks third in the world, the other two being in the Amazon and Congo basins. According to the Indonesian Palm Oil Association, one third of this production is attributed to smallholder farmers and the remaining to multinationals. Palm trees that were planted about 25 years ago have an annual average production rate of 4 tonnes of oil per hectare.

Indonesia is considering plans to increase production this by introducing newer varieties which could double production rate per hectare.

Borneo and Sumatra are the two islands that account for 96% of Indonesia’s palm oil production. As of 2011, there were 7.8 million hectares of palm oil plantations, with 6.1 million hectares of these being productive plantations under harvest, thus making Indonesia the global leader in crude palm oil (CPO) production. According to World Bank reports, nearly 50% of CPO produced in the country is exported in an unprocessed form, while the remaining is processed into cooking oil, about half of which is exported, while the rest is consumed locally.

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