Indonesia’s palm oil production is projected to rise by 3% to 47 million tonnes in the 2025/26 season, as favorable weather conditions and increased fertilizer use support growth, according to a report by the U.S. Department of Agriculture (USDA) Foreign Agricultural Service (FAS).

“The El Niño and Indian Ocean Dipole phenomena are not expected to significantly impact production, meaning normal dry season weather patterns are anticipated,” the report states.

Additionally, with fertilizer costs dropping between 14% and 59% from 2022 to early 2025, applications are set to rise, boosting yield potential.Despite this growth, the total harvested area for palm oil will remain at 14.4 million hectares, and the share of immature oil palms is expected to increase slightly from 15% to 16%.

As palm oil consumption rises, especially in the industrial and food sectors, Indonesia’s domestic demand for palm oil will reach 22.6 million tonnes by 2025/26. “The rollout of the B40 biodiesel blending mandate in March 2025 will drive industrial palm oil consumption to 14.9 million tonnes,” the USDA report forecasts.

To meet the growing demand, Indonesia’s biodiesel capacity will rise by 1.5 billion liters in 2025, although additional investments will be needed to achieve the B50 mandate.

However, government measures, such as a 10% increase in export levies, will limit palm oil exports to a modest rise of 1 million tonnes, reaching 24 million tonnes by 2025/26.

Demand from key markets like China, India, and Pakistan is expected to continue fueling export activity, though with varied growth rates across these regions.

Palm oil stocks in Indonesia are expected to grow by 8%, reaching 5.3 million tonnes in the 2025/26 period, signaling a supply boost.