CPO Prices Rise, Forecast to US$1,720; Indonesia Faces Dilemma over B50 Impact?

Indonesia is confronted with a difficult choice in managing its national palm oil industry in 2027. Amid projections of rising global crude palm oil (CPO) prices, Indonesia’s palm oil production is actually expected to decline due to the impact of El Niño. At the same time, domestic CPO demand for the mandatory B50 biodiesel programme is projected to increase.

Executive Director of the Palm Oil Agribusiness Strategic Policy Institute (PASPI) Tungkot Sipayung said the situation presents a dilemmatic challenge for the government. The rise in global CPO prices indeed opens opportunities for Indonesia to increase exports and earn larger foreign exchange. However, domestic needs such as public cooking oil and biodiesel must also remain a priority.

“Nationally, this is a dilemmatic challenge in managing the national industry during the current El Niño period. On one hand, the rise in global palm oil prices gives Indonesia the opportunity to expand its exports, to earn larger foreign exchange. But on the other hand, the availability of CPO for domestic needs, particularly public cooking oil or Minyakita and the mandatory biodiesel that is a government priority, must not be sacrificed,” Tungkot told CNBC Indonesia on Monday (31/8/2026).

Tungkot projects that the global palm oil market in 2027 will experience higher excess demand compared to 2026. Global CPO prices are estimated to be in the range of US$1,650–1,720 per tonne.

“Global CPO prices in 2027 are estimated at around US$1,650–1,720 per tonne,” he said.

The projected price increase comes as global CPO production is expected to decline. Global CPO production, which reached 85.4 million tonnes in 2025, is estimated to fall to 85.2 million tonnes in 2026 and further decline to around 83.6 million tonnes in 2027.

Indonesia, as the world’s largest producer and exporter of palm oil, is also projected to experience a production decline. Indonesia’s CPO production of 51.6 million tonnes in 2025 is estimated to fall to around 49.2 million tonnes in 2026 and further decline to around 47.6 million tonnes in 2027.

The production decline is estimated to be the impact of El Niño that has hit Indonesia and Malaysia since the third quarter of 2026 and is expected to continue until the second quarter of 2027.

“The impact of El Niño on Indonesia’s palm oil production has begun to be visible in the fourth quarter of 2026 and the greatest impact will occur throughout 2027,” he said.

Amid declining production, Tungkot continued, Indonesia’s domestic CPO consumption is actually increasing. In 2026, B50, which began on 1 July 2026, requires around 14 million tonnes of CPO. CPO demand for food is estimated at around 10.2 million tonnes and oleochemicals around 2.2 million tonnes. Total domestic CPO consumption in Indonesia in 2026 is estimated to reach around 26–27 million tonnes, up from around 24.6 million tonnes in 2025.

Tungkot said that if B50 is fully implemented in 2027, CPO demand for B50 is estimated to reach around 18 million tonnes. With Indonesia’s CPO production estimated at only around 47.6 million tonnes, the volume of CPO available for export is certain to be increasingly limited.

He said the rise in CPO prices does provide incentives for Indonesian palm oil plantation players to increase production and exports. However, the room to increase production during the current extreme El Niño period is technically limited.

For palm oil plantations that are relatively tolerant of drought, there is still an opportunity to increase production through improvements or innovations in quick-yielding best practices. These plantations need to be identified and made reliable during the El Niño period.

Meanwhile, Gapki data shows that production, consumption, and exports of Indonesia’s palm oil industry on an annual basis in January–June 2026 still grew compared to the same period in 2025.

In June 2026, CPO production reached 4,823 thousand tonnes, up 8.59% compared to May 2026 of 4,165 thousand tonnes. PKO production also rose to 449 thousand tonnes from 387 thousand tonnes in May.

Thus, total CPO and PKO production in June 2026 reached 5,277 thousand tonnes, up 8.59% compared to May of 4,552 thousand tonnes. Cumulatively for January–June 2026, total production reached 30,284 thousand tonnes, up 15.82% compared to the same period in 2025 of 27,889 thousand tonnes.

However, the production increase was accompanied by rising consumption and exports that also put pressure on stocks.

Total domestic consumption in June 2026 reached 2,201 thousand tonnes, up 5.92% compared to May of 2,078 thousand tonnes. The increase in consumption mainly occurred in the biodiesel sector, which reached 1,131 thousand tonnes, up from 1,035 thousand tonnes in May.

Cumulatively for January–June 2026, domestic consumption reached 12,994 thousand tonnes, up 5.48% compared to the same period in 2025 of 12,272 thousand tonnes.

On the other hand, total palm oil product exports in June 2026 reached 3,275 thousand tonnes, surging 64.08% compared to May of 1,996 thousand tonnes. Cumulatively for January–June 2026, total exports reached 16,595 thousand tonnes, up 5.79% compared to the same period in 2025 of 15,686 thousand tonnes.

The export value of palm oil products in June 2026 reached US$3.92 billion, up 57.45% from US$2.49 billion in May. Cumulatively for January–June 2026, export value reached US$19.45 billion, up 12.57% compared to 2025 of US$17.277 billion.

With beginning-of-year stocks of 2,068 thousand tonnes, total production for January–June 2026 of 30,284 thousand tonnes, domestic consumption of 12,994 thousand tonnes, exports of 16,595 thousand tonnes, and imports of 32 thousand tonnes, ending stocks in June 2026 were recorded at 2,844 thousand tonnes.

Ending Stocks for 2026 Estimated to Remain Safe

Chairman of the Indonesian Palm Oil Association (Gapki) Eddy Martono said CPO stocks at the end of 2026 should remain in the range of 2.5–2.9 million tonnes.

“Ending stocks for 2026 should still be around 2.5–2.9 million tonnes. There is no supply tightening,” Eddy said when contacted separately.

Nevertheless, Eddy said 2027 production still has the potential to decline. Based on reports from Gapki branches, a number of regions such as Aceh, North Sumatra, West Sumatra, Bengkulu and North Kalimantan are still experiencing rain.

“I have received reports from the branches that Aceh, North Sumatra, West Sumatra, Bengkulu and North Kalimantan still have rain. So it remains likely that 2027 production will decline, because some areas still have rain, the decline is around 3 million tonnes,” he said.

Even so, Eddy confirmed that CPO production for 2026 is still sufficient to support B50.

“This year, 2026, means there is no problem with B50 this year,” he concluded.