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The United States Department of Agriculture, in a report issued by its Foreign Agricultural Service (FAS) on 14 April 2025, forecast that Indonesian palm oil production would rise 3% to reach 47 million tonnes in the 2025/2026 season, driven by improved weather conditions and increased fertiliser use.
The report noted that the El Niño and Indian Ocean Dipole climate phenomena are not expected to have a significant impact, meaning Indonesia will experience a normal dry weather pattern during the season.
It also indicated that fertiliser use is expected to rise following a 14% to 59% drop in prices from 2022 through February 2025.
Despite the increase in production, the harvested area is expected to remain steady at 14.4 million hectares in the 2025/2026 season.
The area of immature oil palm trees is expected to rise from the current 15%-16% share, though it will remain well below the record levels recorded between 2011 and 2014. The FAS anticipates significant expansion in oil palm planted area in the coming years, driven by higher palm oil prices.
On the consumption side, domestic use is expected to rise slightly to 22.6 million tonnes, driven by higher demand from domestic industrial and food sectors. This is particularly true with the implementation of the B40 biodiesel blending mandate since March 2025, which is likely to push industrial consumption of palm oil to 14.9 million tonnes next season.
The report also noted that Indonesia is seeking to implement a B50 blending mandate, though achieving this target will require increased biodiesel production capacity.
The FAS forecast that Indonesia's biodiesel production capacity would rise by 1.5 billion litres from the current level of 19.7 billion litres in 2025. However, the country will still need an additional 4 billion litres to achieve the B50 target, according to data from the Indonesian Biodiesel Producers Association.
Food consumption of palm oil is expected to rise slightly by 50,000 tonnes to reach 7.4 million tonnes.
As a result of rising demand from the domestic biodiesel sector, the Indonesian government raised export levies on palm oil products by 10%, according to the USDA.
Consequently, Indonesian palm oil exports are expected to rise slightly to 24 million tonnes in 2025/2026, compared with 23 million tonnes the previous year.
Demand from China, India and Pakistan will remain a key factor supporting exports, even as imports from China and India decline — a shortfall that higher Pakistani imports will not be sufficient to offset.
Finally, the USDA forecast that Indonesian palm oil stocks would rise 8% to reach 5.3 million tonnes in the 2025/2026 season, reflecting increased supply.
Source: USDA Foreign Agricultural Service