Indonesia, as the world's largest palm oil producer, plays a crucial role in meeting the global demand for vegetable oil. However, despite this significant contribution, the palm oil industry faces complex challenges ranging from trade mafia issues and Debt Payment Obligation Suspension (PKPU) processes to regulatory uncertainties. This article explores the business prospects of Indonesia’s palm oil sector for 2025-2026 while highlighting the impact of on-the-ground challenges.
CPO Price Fluctuations and Projections Until 2026
Indonesia’s palm oil industry, one of the country’s largest economic contributors, continues to navigate volatile price movements. Palm oil prices, as a key export commodity, frequently reflect global market fluctuations influenced by various factors—from unpredictable weather conditions to international trade policies. In recent years, crude palm oil (CPO) price fluctuations have demonstrated the fragility of the global market. The soaring prices in 2021 and 2022 were followed by sharp declines, affecting stakeholders from farmers to industry players.
Historical average CPO price data from 2014 to 2026 show that CPO prices peaked in 2021 and 2022, reaching an average of over USD 1,100 per ton (Statista). However, prices began declining in 2023, with a steeper drop anticipated in early 2025. Statista forecasts CPO prices for 2024, 2025, and 2026 at USD 925 per ton, USD 860 per ton, and USD 850 per ton, respectively. These projections are based on global market trend analysis, where CPO demand is expected to remain volatile due to shifts in international trade policies and increased production from other major palm oil-producing nations such as Malaysia and Thailand.
Additionally, unpredictable weather conditions and a potential decline in demand from the renewable energy sector could also impact prices. Lower CPO prices could affect Indonesia’s competitiveness compared to other palm oil-producing countries like Malaysia, which may be better positioned to adjust their production and pricing strategies in response to market challenges.
As of February 2025, Indonesia’s CPO price stood at USD 955.44 per ton, marking a 9.82% decline from January 2025 (Kemendag.go.id). This drop reflects market tensions influenced by fluctuating global demand and adverse weather conditions impacting palm oil harvests, ultimately contributing to CPO price declines.
Adverse weather and rising production costs further contribute to declining CPO prices, potentially weakening Indonesia’s global market competitiveness, especially against key palm oil producers like Malaysia. This price decline could also reduce national revenues and profits for palm oil farmers who rely on price stability for their business sustainability. Overall, Indonesia’s CPO price trends in early 2025 underscore the increasing challenges faced by the palm oil industry, which must adapt to global market shifts and domestic factors affecting pricing and production.
These price fluctuations illustrate the global market’s vulnerability to various factors, including weather conditions, international trade policies, and demand dynamics. The price downturn directly impacts farmers’ income and Indonesia’s competitiveness in international markets, particularly against Malaysia. In response, one of the Indonesian government’s strategic initiatives has been the implementation of the B40 biodiesel program, officially launched in early 2025. This program aims to reduce Indonesia’s dependence on diesel imports and leverage domestic resources, particularly CPO. The plan to transition to B50 by 2026 reflects the government’s commitment to promoting renewable energy use. However, this initiative also presents new challenges, particularly in ensuring sufficient CPO supply for biodiesel production without compromising environmental and social sustainability. According to a report from Baliportalnews, as biodiesel demand rises, industry players must ensure CPO production can meet this demand while maintaining sustainability.
CRIF Indonesia recommends effective risk mitigation strategies, including product diversification and enhanced production efficiency, to address future price volatility. Close monitoring of global market trends is also crucial.
Decline in CPO Production and Exports in 2024
Indonesia’s palm oil industry faced significant challenges at the end of 2024, with declining crude palm oil (CPO) production and exports, as reported by the Indonesian Palm Oil Association (IPOA). On the consumption side, domestic demand decreased by 2.54%, with biodiesel consumption dropping from 1.052 million tons to 994 thousand tons. Meanwhile, oleochemical consumption also declined, whereas food sector consumption rose from 845 thousand tons to 869 thousand tons. This trend indicates that despite downturns in some sectors, demand for food products remains stable, presenting an opportunity for producers to focus on this segment (GAPKI).
From 2019 to 2023, Indonesia’s palm oil export volumes exhibited a fluctuating trend, peaking at 30.23 million tons in 2019 before gradually declining to 26.33 million tons in 2022, then rebounding to 27.54 million tons in 2023. Meanwhile, import volumes remained low, with a significant increase in 2020 reaching 94,525 tons before plummeting to 872 tons in 2021 and 612 tons in 2022, then slightly rising to 824 tons in 2023. This trend reflects fluctuating domestic demand and global market dynamics, though Indonesia remains the world’s leading palm oil producer.
Examining export-import trends for 2023 and 2024 reveals a more pronounced decline in exports in 2024. In the first half of 2023, Indonesia’s exports totaled USD 17.3 million, while imports were only USD 2.06 million. However, in 2024, exports dropped to approximately USD 15.7 million, although this still represents a significant contribution to Indonesia’s economy. Meanwhile, imports rose to USD 3.7 million in 2024, indicating increased domestic market demand. This decline in exports and rise in imports reflect global market dynamics affecting Indonesia’s palm oil industry, which must navigate external challenges such as shifts in global trade policies and falling CPO prices.
According to a report from Indonesia’s Central Statistics Agency (BPS) released on February 17, 2025, the export value of crude palm oil (CPO) and its derivatives saw a significant decline in January 2025. On a month-to-month (mtm) basis, CPO export value dropped 24.1% to USD 1.44 billion, while on a year-on-year (yoy) basis, it fell 16.68% compared to the same period the previous year. CPO export volume also decreased from 1.65 million tons in December 2024 to 1.27 million tons in January 2025. This decline was driven by falling global CPO prices, which dropped from USD 1,146.27 per ton in December 2024 to USD 1,134.08 per ton in January 2025. Additionally, exports of other key commodities, such as coal and steel, also declined during this period (Ekonomi Bisnis).
Indonesia’s 2023 palm oil export data highlights diverse distribution across various destination countries, with India and China as the two largest markets. India was the top importer, with an export value of USD 4.52 billion and a volume of 5.41 million tons, followed by China with USD 4.25 billion and 5.62 million tons. Pakistan ranked third, followed by the United States. Bangladesh, Malaysia, and Egypt recorded lower values and volumes, reflecting different market preferences. Countries such as Vietnam, Japan, and the Netherlands also contributed as important export destinations, though the per-ton value for some, like Japan (USD 658.88 million for 4.79 million tons), tended to be lower than in other markets. While India and China remain dominant markets for Indonesian palm oil exports, diversifying export destinations across Africa, Europe, and Southeast Asia offers Indonesia opportunities to reduce reliance on a few major markets. In facing global challenges such as price fluctuations and trade policy changes, this market diversification can help maintain the stability of Indonesia’s palm oil sector in the future.
CRIF Indonesia, as an institution focused on analysis and research, closely monitors the decline in Indonesia’s palm oil exports and production in 2024. The drop in CPO export volume and global prices, as recorded by Indonesia’s Central Statistics Agency (BPS), highlights global market fluctuations affecting Indonesia’s competitiveness. CRIF Indonesia may analyze external factors such as international trade policies and extreme weather conditions that further exacerbate export performance and provide recommendations to mitigate these impacts. Despite the downturn in the biodiesel and oleochemical sectors, stable demand for food-related palm oil products presents an opportunity for the industry to focus on domestic markets and alternative segments. As a market research institution, CRIF Indonesia may suggest improvements in supply chain efficiency and product diversification to ensure the long-term sustainability of the sector amid global challenges.
