El Nino may cut output by 20 percent next year

Next year's dry season combined with El Ni*o will threaten Indonesia's agricultural production, including that of palm oil, which may drop by up to 20 percent, a senior government official said on Tuesday.

Speaking to reporters on the sidelines of a palm oil workshop, the ministry of agriculture's director general in charge of plantations, Achmad Manggabarani, specified however that El Ni*o's impact on palm oil production might not be as strong as its effect on other agricultural products.

He said the impact would depend on the nature of El Ni*o.

"If it is extreme and causes dry weather for more than three months, then next year's production might be 20 percent below target.

"In the past, weather conditions have always influenced seasonal crops but not crops like palm oil. If the dry season starts in November or December this year, it will not impact this year's production of palm oil, but will start affecting palm oil production next year," he said.

In a separate interview, he told Bloomberg that a mild El Ni*o might crimp production by 5 percent or less. Indonesia's output may increase by 8 percent to 23.2 million tons next year, up from an estimated record 21.5 million tons this year, the ministry forecast on June 30.

El Ni*o weather patterns, caused by an increase of the water temperature in the tropical Pacific, can cause drought in parts of Asia. Since about 90 percent of the world's palm oil is produced in Malaysia and Indonesia, lower outputs will support prices, which already surged 27 percent this year on Malaysia's derivatives exchange.

Malaysia, which forecast a record output of 18.3 million tons this year, may see production shrink by as much as 16 percent next year if El Ni*o occurs, Plantation Industries and Commodities Minister Bernard Dompok said July 16.

Joko Supriyono, the general secretary of the Indonesian Palm Oil Association (IPOA), said improving the watering system of palm oil plantations was the best course of action to take to prepare for the impact of El Ni*o.

"But we can only minimize the impact. We cannot avoid it entirely. It is mainly because the amount of water we can store in our plantations is limited to a few months. El Ni*o will not only impact next year's production. It will also affect the production of the year after that, as El Ni*o will affect the growth of palm oil trees from the start of the dry season," he told The Jakarta Post on Tuesday.