Indonesia’s Palm Oil Industry Braces for 3 Million-Ton Output Loss

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El Niño could cut Indonesia’s palm oil output by 3 million tons in 2027, despite strong exports and domestic consumption.

Jakarta. Indonesia’s palm oil production could fall by as much as 3 million tons in 2027 as El Niño intensifies drought risks and threatens plantations, although the industry continues to generate strong export earnings, according to the Indonesian Palm Oil Association (Gapki).

Gapki chairman Eddy Martono said the industry remained resilient through September 2026 despite mounting challenges, including extreme weather, plantation fires and financial constraints faced by smallholder farmers.

Some farmers have been forced to delay fertilizing their plantations because of economic pressures, leaving trees more vulnerable to the effects of prolonged drought.

“That is the reality of our industry. El Niño could reduce palm oil production by as much as 3 million tons. We are not approaching this with vague optimism, but with honesty. El Niño makes an already difficult situation worse because it brings not only drought but also fires,” Eddy said.

He made the remarks during his opening address at the 22nd Indonesian Palm Oil Conference and 2027 Price Outlook (IPOC 2026) in Nusa Dua, Bali, on Thursday.

Eddy said plantation fires had affected several regions, destroying not only trees but also the livelihoods of the people who depend on them. Damage to plantations also wipes out years of investment and can reduce productivity for several subsequent harvesting seasons.

Despite the risks, Indonesia's palm oil industry has maintained strong production and export performance. Production reached 47 million tons as of September 2026, up 8.4% from the same period last year.

Exports of key palm oil products, including crude palm oil (CPO), palm kernel oil and oleochemicals, exceeded 27.3 million tons, marking a 9.6% annual increase. The shipments generated $32.3 billion in foreign exchange earnings.

Domestic consumption also remained strong at 18.8 million tons, supported by the government's B50 biodiesel mandate, which requires a 50% palm oil blend in diesel fuel.

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