InfoSAWIT, BOGOR – Indonesia’s palm oil industry is entering 2026 with relatively strong price prospects, although market performance will continue to depend on production, domestic consumption, exports and government policies, particularly the national biodiesel program.

The 2026 Palm Oil Commodity Outlook projects CPO prices in a range of US$959 to US$1,172 per tonne under different scenarios.

According to a presentation by Rizki Amalia of the Palm Oil Research Center (PPKS), PT Riset Perkebunan Nusantara, included in the 2026 Plantation Commodity Outlook, CPO prices in 2026 are projected at US$959, US$1,066 and US$1,172 per tonne.

For comparison, the realized CPO price in 2024 stood at US$942 per tonne, while the projection for 2025 was US$1,017 per tonne.

The range of projections highlights the continued sensitivity of palm oil prices to global market conditions and fundamental supply-and-demand factors.

One of the major factors underpinning the 2026 outlook is Indonesia’s biodiesel program.

The implementation of the B40 biodiesel mandate is included among the factors expected to influence CPO prices. Other drivers include economic recovery in importing countries, production levels of competing vegetable oils and import tariff policies adopted by major buying countries.

Biodiesel has become increasingly important to Indonesia’s domestic palm oil consumption. Data presented in the 2026 outlook shows that biodiesel consumption grew at an average rate of around 12.2% annually between 2020 and 2024.

By 2025, Indonesia’s installed biodiesel production capacity had reached 19.15 million kiloliters, supported by 26 biodiesel plants.

The growing use of palm oil for energy could therefore provide an important source of domestic demand while helping maintain balance in the palm oil market.

However, the biodiesel program also faces several challenges, including feedstock sustainability, price differences between crude oil and vegetable oils, the adequacy of biodiesel subsidies and domestic production capacity.

Domestic Consumption and Exports Remain Strong

Beyond biodiesel demand, domestic consumption and exports remain important pillars of Indonesia’s palm oil industry.

Through July 2025, domestic palm oil consumption reached 14.3 million tonnes, an increase of 6.57%. Exports stood at 19.2 million tonnes, up 11.1% from the same period.

The value of Indonesia’s palm oil exports through July 2025 reached approximately Rp343.7 trillion, underscoring the commodity’s substantial contribution to the national economy.

Despite relatively positive production and price prospects, Indonesia’s palm oil sector continues to face structural challenges.

The 2026 outlook identifies governance as one of the industry’s key concerns, including land legality, the resolution of palm oil plantations located within forest areas, implementation of sustainability standards and the governance of smallholder plantations.

Downstream development is another priority. The industry needs to diversify export markets, expand its presence in emerging markets, strengthen refining and downstream processing capacity, and increase investment in research and development.

These measures are considered essential for Indonesia to move beyond reliance on raw or semi-processed palm oil exports and capture greater added value domestically.

Strengthening Competitiveness

The 2026 Palm Oil Commodity Outlook also recommends stronger cost leadership to maintain competitive pricing, stabilize supply, optimize the CPO exchange and strengthen global palm oil diplomacy.

For Indonesia’s palm oil industry, the challenge in 2026 will therefore extend beyond increasing production. The sector must also improve competitiveness, expand markets, accelerate downstream development, raise smallholder productivity and strengthen governance.

With CPO prices projected to remain relatively firm and domestic biodiesel demand continuing to expand, the outlook provides room for optimism.

If productivity gains can be combined with faster replanting, stronger downstream industries, improved governance and supportive trade policies, Indonesia’s palm oil sector could maintain its position as one of the country’s strategic commodities in 2026.

Ultimately, the challenge is not simply to produce more palm oil, but to convert higher production into greater competitiveness, added value and economic benefits across the entire value chain, including smallholders. (T2)

Source: InfoSAWIT