Indonesia palm oil supply faces 2027 pressure

Indonesia's palm oil supply is projected to face significant pressure by 2027 due to rising domestic demand and declining production. The implementation of the B50 biodiesel program, set for full coverage starting October 1, 2026, is expected to increase domestic crude palm oil (CPO) absorption to between 15.2 and 16.3 million tons annually.

Production is also threatened by weather conditions. The Indonesian Palm Oil Association (GAPKI) estimates that production could drop by 2.9 percent to approximately 56.8 million tons in 2027, driven by El Niño-induced droughts in key plantation hubs like Sumatra and Kalimantan.

Furthermore, new export governance regulations will require five palm oil products to be exported through PT Danantara Sumber Daya Indonesia (DSI) starting January 1, 2027. Despite these domestic pressures, India remains a critical strategic market for Indonesian palm oil, as the country currently imports nearly half of its requirements from Indonesia.