Bustanul Arifin: Palm Oil Must Move Up a Level, Downstream Expansion Needs Strong Upstream Supply

Bustanul delivered the remarks at the National Palm Oil Seminar held by UPN “Veteran” Yogyakarta, attended online by on Thursday (22/1/2026).

He explained that Indonesia remains the world’s largest palm oil producer, contributing around 48% of total global production. By 2025, Indonesia’s oil palm plantation area is estimated at 17.1 million hectares, with CPO production reaching 49.4 million tons.

Amid competition among vegetable oils, he said palm oil remains the most efficient in producing oil compared with soybean, sunflower, rapeseed, and other vegetable oils.

“Palm oil produces vegetable oil more efficiently than any other oil crop globally,” he said.

B40 Policy Lifts Prices: A Positive Sign or an Early Alarm?

Bustanul also commented on Indonesia’s biofuel policy, which promotes B40 blending. He said the policy has supported higher CPO and cooking oil prices, which in turn has lifted FFB prices for smallholders.

However, he warned that price increases must be read carefully. While higher prices may improve smallholder incomes, they could also trigger new problems if supply cannot keep pace with demand.

“CPO and cooking oil prices are rising, and smallholders’ FFB prices are rising too. Is this a good sign?” he said.

Slow Progress on Sustainability Certification

According to Bustanul, Indonesia has adopted multiple sustainable palm oil certification schemes, including voluntary standards such as RSPO and ISCC, as well as the mandatory ISPO framework.

However, implementation remains slow and needs acceleration—especially to meet demands for stronger governance and supply chain traceability.

Bustanul stressed that strengthening the upstream sector cannot be approached with a one-size-fits-all policy, as Indonesia’s smallholders are highly diverse.

He cited a classification of five types of smallholders, ranging from those collaborating with companies and NGOs, to those fully independent and dependent on intermediaries, including partnership models such as KKPA and NES.

This differentiation, he said, is crucial for designing targeted empowerment policies and technical assistance programs.

Global Demand Grows, but Supply Expansion Is Slowing

Bustanul noted that global vegetable oil consumption continues to rise, with an average annual growth of about 6.3 million tons over the past 20 years. Palm oil and soybean remain the key price drivers, accounting for around 57% of global consumption.

However, he warned global supply growth has slowed to around 1.4 million tons, down from an average of 2.9 million tons up to 2020. Meanwhile, competing vegetable oils are expanding faster.

He argued palm oil no longer needs to defend market share through price discounting, but should instead compete through efficiency and productivity.

“Palm oil is still dominant, but it doesn’t need to rely on market share through discounts anymore. What matters is efficiency,” he said.

CPO Exports Decline as Competitors Grow

In his presentation, Bustanul said global CPO exports currently stand at 55.3 million tons, with a CPO share of around 49%, down from 57% in 2019.

For Indonesia, CPO exports in 2025 are estimated at 26.7 million tons, down from 30.2 million tons in 2019. Malaysia has shown a similar trend, falling from 18.4 million tons (2019) to 15.6 million tons (2025).

Meanwhile, exports of soybean oil, rapeseed oil, and sunflower oil have increased by around 8 million tons over the past six years.

EUDR Could Become a New Blow

Bustanul believes the European Union’s new regulation—the European Union Deforestation Regulation (EUDR)—could significantly impact palm oil.

The EUDR restricts the entry of certain products into the EU market, including palm oil, unless they meet deforestation-free requirements, comply with applicable laws, and pass due diligence traceability requirements down to geolocation.

He said Indonesian palm oil is expected to be among the most affected commodities, with an estimated value of €5.12 billion, representing around 65% of the total value of the seven regulated commodities.

“Traceability is no longer an option—it is a requirement to survive in the market,” he said.

Productivity Remains the Biggest Homework

Bustanul emphasized that the most pressing challenge in Indonesia’s palm oil industry is low productivity, especially among smallholders.

He said smallholder FFB productivity averages around 12.5 tons/ha, compared with 17.5 tons/ha for private estates—far below the potential of 30 tons/ha.

CPO productivity is also considered low and declining, at around 3.43 tons/ha for smallholders and 4.45 tons/ha for large plantations, far from the potential 8 tons/ha.

He linked this to uneven implementation of Good Agricultural Practices (GAP), as management capacity among smallholders varies widely.

Downstream Growth Must Go Hand-in-Hand with Stronger Upstream

In closing, Bustanul stressed that downstream development is crucial, but its success depends on strong integration with upstream strengthening.

He argued the palm oil expansion moratorium does not need to be lifted, as the priority should be increasing productivity through better farming practices, technical assistance, smallholder empowerment, and fair FFB pricing.

He also highlighted the need to strengthen traceability and certification as governance foundations. In addition, he pointed to economic diplomacy through the Indonesia–European Union Comprehensive Economic Partnership Agreement (IE-CEPA) as an important benchmark to support downstream ambitions.

In the medium to long term, Bustanul encouraged Indonesia’s downstream roadmap to move beyond energy and oleochemicals toward functional food industries that improve health and vitality.

“The key prerequisites for downstream success are synergy, integration, and strengthening the upstream sector,” he concluded.