Indonesia’s palm oil output may grow by 1.8 million metric tons to 22.8 million tons in 2011 because of increased planting, Indonesian Palm Oil Board vice chairman Derom Bangun said in on Friday.
“World demand will be more than 2 million tons, maybe 3 million tons,” Bangun said in Bali. “From that point of view, I consider that supply through 2011 will be very tight.”
Palm oil output has been lower than usual this year because of heavy rainfalls caused by the La Nina weather event disrupting harvesting.
Global demand for edible oils will exceed supply for a third straight year, increasing by 4.5 million tons, as supply expands 3.5 million tons, said Dorab Mistry, director of Godrej International, on Sunday.
He predicted prices will reach 3,600 ringgit ($1,140) a ton this month.
Bangun said prices will remain at about that price until January, after which demand will be relaxed, sending prices about 10 percent lower by the end of the first quarter.
Prices will increase “significantly,” by as much as 10 percent by September, after the end of peak production season, assuming there is no fluctuation in fuel prices, he said.
Indonesia’s palm oil output this year is expected to be 21 million tons, a slight increase from 20.3 million tons in 2009, because of bad weather and because aging trees are overdue for replanting, Bangun said.
The industry has grown rapidly over the past few years but is facing rising criticism from environmental groups over deforestation and the annual slash and burn tactics which leaves large parts of Malaysia and Singapore blanketed in haze.
Palm oil, however, is a major export revenue earner for the country and palm oil companies have registered healthy profits.