Indonesia Agriculture

Improved weather conditions and expanded acreage should help Indonesia’s palm oil industry rebound from a weak harvest in 2016, though projections of higher output may put downward pressure on prices and have prompted calls for increased domestic consumption.

Government and private initiatives are set to broaden agriculture’s contribution to economic growth and boost smallholder operations by encouraging the use of more advanced technology in the farming sector.

Hopes are rising that long-awaited reforms of state-owned enterprises and government initiatives can help Indonesia’s agriculture sector rebound from a year of commodity price shocks, which have taken their toll on the country’s biggest exports, particularly palm oil. 

A combination of short- and long-term factors are putting at risk Indonesia’s position as one of the world’s leading coffee producers, while rising domestic demand could eat into stocks available for the profitable export market.

Predictions of rosy export figures in 2013 for Indonesia’s palm oil sector offer the country a chance to answer claims that it is not living up to its agricultural potential. However, critics say more innovation and private sector development are needed if self-sufficiency and agribusiness goals are to complement each other.

After topping Malaysia as the world’s primary producer and exporter of palm oil in 2007, Indonesia is now seeking to support its downstream refining operations and further expand this vital sector. The Indonesian government’s lowering of the export tax cap on crude palm oil (CPO) and refined products last August has seen local refiners moving ahead of their rivals.