Indonesian Palm Oil Industry Outlook for 2026

Production Growth Expectations

The Indonesian Palm Oil Association (Gapki) forecasts that Indonesia's palm oil production, including Crude Palm Oil (CPO) and Palm Kernel Oil (PKO), will grow by 4-5% in 2026 compared to the projected production levels in 2025 ¹

. The 2025 production is expected to reach around 56-57 million tons, representing a 10% increase from 2024 levels.

Drivers of Production Growth

Gapki Chairman Eddy Martono emphasized that the anticipated growth in 2026 will primarily stem from improved productivity and the maturation of existing plantations, rather than expansion into new areas ¹

. This approach aligns with sustainable development practices by focusing on optimizing current resources.

Biodiesel Allocation for 2026

In a related development, the Ministry of Energy and Mineral Resources has officially set the biodiesel allocation for 2026 at 15.646 million kiloliters for B40, which contains 40% biodiesel derived from palm oil ²

. This allocation is similar to the 2025 level of 15.6 million kiloliters, with 7.55 million kL for the Public Service Obligation (PSO) segment and 8.07 million kL for non-PSO.

Environmental and Expansion Concerns

While the biodiesel mandate supports palm oil demand, environmental watchdogs like Sawit Watch have raised concerns about potential massive new land expansion to meet future biodiesel targets, particularly with plans for B50 implementation in mid-2026 ²

.

Global Market Context

Gapki noted that the global palm oil industry is entering 2026 with a unique combination of strong demand fundamentals and increasingly complex policy environments ¹

. This context suggests that Indonesia's palm oil sector will need to navigate both market opportunities and regulatory challenges in the coming year.