Indonesia’s oilseeds and palm oil markets are witnessing significant developments in 2024/25, shaped by government policy changes, climatic conditions, and global trade shifts. The introduction of the B40 biodiesel mandate expected to drive higher domestic palm oil consumption, while the expansion of the Free Nutritious Meals Program (MBG) is fueling increased demand for soy-based food products and animal feed. Meanwhile, palm oil exports are facing a decline due to growing domestic industrial use, creating potential shifts in international trade dynamics.
This report presents an in-depth analysis of Indonesia’s palm oil, soybean, and soybean meal markets, covering production trends, consumption forecasts, trade policies, and regulatory changes.
Palm Oil Market Overview
Production Growth Supported by Favorable Weather
Indonesia’s palm oil production for 2024/25 projected to increase by 1.4 million metric tons (MMT) to 45.5 MMT, benefiting from above-average rainfall in key production regions such as South Sumatra, Riau, and Kalimantan. Marking recovery from the 2023/24 production decline, which had been impacted by El Niño-driven drought conditions.
The Indonesian Meteorological Agency (BMKG) reported that rainfall from October to December 2024 was well above normal, leading to improved palm oil yields. This rebound in production expected to enhance domestic supply and industrial use, particularly for biodiesel blending
B40 Biodiesel Mandate and Domestic Consumption
The Indonesian government has officially rolled out the B40 biodiesel mandate, raising the required biodiesel blend from 35% (B35) to 40% (B40). As a result, industrial palm oil use projected to reach 14.7 MMT in 2024/25, reflecting a 300,000 MT increase from the previous year.
- The Ministry of Energy and Mineral Resources (ESDM) has allocated 15.62 billion liters of biodiesel for 2025, with:
- 7.55 billion liters for Public Service Obligation (PSO) diesel (subsidized fuel).
- 8.07 billion liters for non-PSO diesel (private sector fuel).
- The Crude Palm Oil (CPO) Fund Agency (BPDPKS) is providing subsidies for PSO diesel only, with funding limitations affecting broader subsidy coverage.
- Transition to B40 expects to be fully completed by the end of Q1 2025. With 80-92% compliance anticipated across the fuel sector.
Trade and Export Challenges
Although palm oil production is increasing, exports are projected to decline by 2% to 25.5 MMT. Due to higher domestic demand driven by the B40 mandate. Despite this decline, exports remain 14% higher than 2023/24, which had seen reduced supply following El Niño-driven production setbacks.
Key trade dynamics include:
- Decreasing demand from India and China:
- India’s imports of Indonesian palm oil expected to decline by 24% due to stronger competition from alternative vegetable oils.
- China’s imports projected to fall by 15%, reaching an estimated 2-3 MMT.
- Increased CPO export levies:
- The GOI has proposed higher export levies to fund B40 biodiesel subsidies, potentially impacting the competitiveness of Indonesian palm oil in global markets.
- Declining stockpiles:
- Palm oil stocks expected to shrink to 3 MMT as domestic consumption rises, reducing availability for exports.
Soybean and Soybean Meal Market
Soybean Demand Surges Due to Free Nutritious Meals Program (MBG)
The expansion of the Free Nutritious Meals Program (MBG) is driving higher demand for soy-based foods, particularly tofu and tempeh. The program, launched in January 2025, expects to:
- Serve 3 million students by April 2025 and expand to 6 million students by August 2025.
- Increase demand for soy-based protein sources, leading to a 6% rise in food-use soybean consumption, reaching 2.78 MMT in 2024/25.
Soybean Imports Remain Strong
Imports forecast to increase by 1% to 2.6 MMT, supported by stable demand from the food processing industry.
- The United States remains Indonesia’s largest supplier, accounting for 85-90% of imports, followed by Canada (10-12%).
- U.S. soybeans preferred due to their consistent supply, high protein content, and yellow color, making them ideal for tofu and tempeh production.
Soybean Meal Market Expands with Poultry Industry Recovery
Indonesia’s soybean meal imports forecast to grow by 7% to 5.4 MMT, fueled by recovering poultry feed demand. The poultry sector remains the largest consumer of soybean meal, using it as a key feed ingredient with an inclusion rate of 20-25%.
- Brazil dominates the soybean meal import market, followed by Argentina and the U.S..
- Zero import tariffs on soybean meal continue to support feed affordability and boost poultry production.
Regulatory and Policy Developments
Cooking Oil Market Regulation
The Indonesian government has taken steps to stabilize domestic cooking oil prices and secure feedstock supplies:
- Export restrictions on Used Cooking Oil (UCO), Palm Oil Mill Effluent (POME), and High Acid Palm Residue (HAPOR) to ensure sufficient raw materials for the domestic market.
- Expansion of the Domestic Market Obligation (DMO) policy, requiring palm waste product exporters to allocate supply for domestic use.
- Higher DMO pricing for crude palm oil (CPO) to compensate exporters for lost revenue due to export restrictions.
Conclusion and Future Outlook
Indonesia’s oilseeds and palm oil sectors are poised for significant transformations in 2024/25, driven by:
- Increased palm oil production, supported by favorable weather conditions.
- Growing biodiesel demand, as the B40 mandate redirects more palm oil to domestic industrial use.
- Stable soybean imports, reinforcing government-backed food security initiatives.
- Regulatory tightening on palm oil exports, shifting trade priorities toward domestic supply management.
While these policies aim to enhance food and energy security, challenges such as rising competition in global vegetable oil markets, fluctuating CPO prices, and changing trade regulations will continue to shape Indonesia’s oilseeds trade landscape.
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