Fri, 30 Sep 2011

From: Reuters

(Reuters) - Indonesian crude palm oil exports may shrink due to the slowing global economy which could become worse than the 2008 downturn, but downstream industries and domestic demand for biofuels could benefit, the Indonesian Agriculture Minister said on Thursday.

Indonesia is the world's top producer of palm oil, with exports expected to hit 17 million tons this year and output at about 23 million tons.

"Our palm oil is one of the biggest in the world," Indonesia's Agriculture Minister Suswono told Reuters. "With the slowing global economic growth, its market may be shrinking -- the volume may decline."

Malaysian benchmark prices traded at 2,886 Malaysian ringgit ($912.569) a metric ton at 0841 GMT, and have fallen almost 25 percent this year, due in part to the uncertain economic growth outlook.

Investor worries about the ability of European leaders to tackle a debt crisis threatening the global financial system.

"Economic crises in the U.S. and Europe will affect Indonesia's economy for sure," he said. "That's why our president has prepared steps to face the crisis which may be bigger and stronger than the one in 2008.

"However, we also can anticipate by diverting partly the current global market of CPO to the domestic market to be processed locally to produce downstream products like bio-fuel," he said.

"It would be a kind of a blessing in disguise where the global economic crisis may drive and accelerate the downstream agro industries."

On Wednesday, authorities urged large state firms to coordinate before they buy U.S. dollars, a step to protect Indonesia's struggling rupiah currency which has fallen about 4 percent against the dollar this month.

"Automatically, export will be more interesting for the business people," Suswono said of the falling rupiah. "Our central bank will keep rupiah exchange rates stable."


Indonesia, the world's most populous Muslim nation, has set ambitious targets of becoming self-sufficient in both white sugar and rice by 2014.

The country was self-sufficient in rice in the early 1980s but then farmland was turned into housing estates for a booming population, while rampant smuggling put pressure on local growers.

"We are not only aiming at rice self-sufficiency but also at exporting rice," said Suswono, who said the target was to have a rice surplus of 10 million tons in 2014.

In July, the statistics bureau in Indonesia -- the world's third-largest rice grower -- forecast unmilled rice production of 68.06 million metric tons in 2011.

"We currently have 13 million hectares of paddy fields with average productivity of 5.1 (metric) tons a hectare," he said. "If we can increase the productivity to 6-7 (metric) tons a hectare then it is easy for us to reach the self-sufficiency target."

Indonesia, Southeast's Asia biggest sugar consumer was also once the world's second-largest sugar exporter after Cuba in the 1930s. But aging sugar mills, a vast network of smallholders and an influx of cheaper imported sugar put pressure on local production.

"To achieve white sugar self-sufficiency in 2014, we need additional land for sugarcane cultivation (of) at least 350,000 hectares," he said. "I'm optimistic that we can achieve the target." ($1 = 3.162 ringgit)