October 20, 2015 / 8:03 AM / 2 years ago

Indonesia's 2016 palm output seen hampered by El Nino -industry

JAKARTA, Oct 20 (Reuters) - Gains in Indonesia’s palm oil output next year will be 500,000 tonnes lower than initially expected, the chairman of an industry body in the world’s top producer said, as the El Nino dry weather pattern offsets higher yields from maturing trees.

Crude palm oil will rise to 33 million tonnes in 2016, Derom Bangun, chairman of the Indonesian Palm Oil Board told reporters on Tuesday, lower than the 33.5 million tonnes initially estimated and the 31.5 million tonnes forecast for this year.

Indonesia is expected to face moderate El Nino dry conditions which could strengthen until December, and any drop in production may support benchmark palm prices, which have added 2 percent this year and are currently trading at around 2,302 ringgit ($543) per tonne.

“There will be increase in production from new trees planted in 2010/2011,” said Bangun, whose group is an umbrella organisation of major Indonesian palm oil associations and gives policy recommendations to the government. “For next year, weather will also effect production.”

The El Nino, or a warming of sea-surface temperatures in the western Pacific, typically leads to scorching weather across Asia but heavy rains and floods in South America.

Japan’s weather bureau said earlier this month that an El Nino weather pattern was continuing and there was a strong possibility it would stretch into spring.

Both the Indonesian Palm Oil Association and palm giant Golden Agri-Resources have both cut their Indonesia palm production forecasts in recent weeks due to El Nino.

Palm oil is used mainly as an ingredient in food such as biscuits and ice cream, and in the production of biofuels.

$1 = 4.2410 ringgit Reporting by Bernadette Christina; Writing by Michael Taylor; Editing by Editing by Michael Perry

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