MEDAN. Oil palm farmers and companies in the country are feared to be disappointed that their hope of a better year in 2016 was all false.

The palm oil market has long been hit by deep slump, and until the end of 2015 there has been no sign that the market would recover in 2016. 

Worse still, lengthy drought has reduced productivity.

The Indonesian Palm Oil Council (DMSI) estimated that the countrys production of crude palm oil (CPO) reached only 30.8 million tons falling short of the target of 31.5 million tons in 2015.

Earlier it was predicted that the palm oil prices would rise that would boost production. 

The years of low prices are feared to continue through 2016, but production is expected to rise to 33 million tons.

"The challenge is greater in 2016 than in 2015," General Chairman of DMSI Derom Bangun said here earlier this week.

The CPO market is expected to follow the trend in the global oil market, which has been on the decline lately.

Many had predicted the condition would be better in 2016 with a rebound in oil price to be followed with a rise in CPO price. 

However, the oil price has hit a new record low of less than US$35 per barrel. 

"It is predicted that the CPO price would not rise to cross the level of US$650 per ton (CIF Rotterdam) in 2016," Derom said. 

DMSI, therefore, wanted to invite all stakeholders to address a number of issues related to palm oil sector including forest fires that have destroyed large oil palm crop.

DMSI supports joint efforts initiated by the Association of Palm Oil Companies (Gapki) and other institutions to prevent forest fires in 2016, he said.

DMSI also supports the idea of expanding palm oil research and adoption of the standard of Indonesian Sustainable Palm Oil (ISPO) should be fully supported, Derom said.

Government role 

General chairman of the Indonesian Oil Palm Farmers (Apkasindo), Anizar Simanjuntak called for greater role of the government in reviving palm oil business. 

The government could encourage production of CPO-based bio-diesel oil to increase demand for palm oil in the country, Anizar cited. 

He said oil palm business with the help of the government has to survive the difficult period as it involves the interest of large number of the farmers. 

Meanwhile, a team determining prices of fresh fruit bunches (FFB) of oil palm for Riau raised the price of the commodity last week.

CPO and FFB prices rose to follow the falling value of rupiah against the U.S. dollar, said the team secretary Rusdi.

Rusdi said the dollar has appreciated rising over the majority of global currencies including rupiah and Malaysian Ringgit after the U.S. central bank finally raised its fund rate in mid December.

The team raised the price of FFB of palm oil trees of 10-20 years in age Rp23.29 to Rp1,395.98 per kilogram effective as from December 30 to January 5, 2016.

"Meanwhile, the contract price of CPO in Malaysia rose 48 ringgit to 2,421 ringgit per ton for delivery in March 2016," he said on Wednesday.

He predicted the price of CPO would rise higher to follow the dollar appreciation.

He said the price of FFB of 3-year old oil palm trees was Rp999.29 per kilogram, Rp1,115.82 per kg for FFB of 4-year old tree and Rp1,358.15 per kg of FFB from 9-year old trees.

The highest price is Rp1,362.08 per kkg of FFB from 21 year-old tree . The price of CPO is Rp6,153.48/kg and that of palm kernel is set at Rp4,420.28/kg.

Palm oil is a major export earner for Indonesia, the worlds largest producer of CPO.

Editor: Adi Wikanto