El Niño Might Cause Indonesian Palm Oil Production to Fall by 25% in 2016 – Golden Agri CEO

The building El Niño effect may cause a significant disruption in palm oil production in Indonesia, the world’s top producing country, according to Franky Widjaja, chairman and chief executive of Golden Agri Resources.

“This time, the El Nino is quite intense, compared to the previous years,” says Widjaja, who is also vice chairman of agribusiness and food at the Indonesian Chamber of Commerce and Industry.

The strengthening effect may cause Indonesian palm oil output to fall by between 25% and 30% in 2016. Production for this year is forecast to be 33 million tons.

Palm oil prices have been declining in line with declines across all global commodity prices, but the effects of this El Niño are already becoming evident in the market. Recently, palm oil futures hit a low of 1,867 ringgit on August 26, but currently futures traded on the Bursa Malaysia Derivatives in Kuala Lumpur are at 2,480 ringgit.