Indonesia's palm oil output is expected to decline by 2.9% to 56.8 million metric tons in 2027, according to the Indonesian Palm Oil Association (GAPKI). As reported by Business Standard, this forecast represents a significant drop from the country's current production levels, with the decline attributed to prolonged dry weather conditions that have disrupted plantation maintenance activities.
Indonesia, the world's largest palm oil producer, is experiencing conditions from the El Niño weather pattern that have caused drought and exacerbated wildfires in Sumatra and Kalimantan. According to GAPKI secretary general Hadi Sugeng, the dry weather has made fertilizer application wasteful as it vaporizes rather than providing nutrients to plants. The association noted that many companies have stopped fertilizing due to these challenging conditions.
Fertilizer prices have increased by 30% in the second half of this year due to impacts from the Middle East war, as reported by GAPKI. This cost escalation has further pressured plantation operations, making agricultural inputs less economically viable for producers already facing weather-related challenges. The price increases have particularly affected companies that rely heavily on fertilizer for maintaining optimal crop yields.
GAPKI has revised its 2026 palm oil production estimate downward to 58.5 million metric tons, below its earlier projection of 58.8 million tons. As reported by Business Standard, the revision reflects the impact of dry weather that has slowed down fruit maturity across plantations. Despite this decline, 2026 output is expected to be 3.4% higher than the 56.55 million tons produced in 2025, supported by replanted areas and new estates entering production phases.
The association noted positive developments in palm oil cultivation expansion, with replanting activities by companies entering the production phase. According to Hadi Sugeng, replanted areas over the past five years are now producing crops, contributing to overall output growth. Additionally, there is an indication of increased area under palm oil cultivation through conversion of non-oil palm to oil palm, particularly among smallholder plantations, which could support future production growth despite current weather challenges.
