SMART, or PT Sinar Mas Agro Resources Technology, is likely to produce about 2.2 million tonnes of palm oil this year, Susanto, chief executive of the company's West Kalimantan operations, told Reuters.
"For next year, hopefully there will be an increase of 5-10 percent," Susanto said on the sidelines of the 8th Annual Indonesian Palm Oil Conference.
"We have new areas and more mature areas, especially in Central Kalimantan," he added.
SMART runs the Indonesia palm oil operations of its Singapore-listed parent Golden Agri-Resources .
The company had earlier estimated output to rise by about 8 percent a year over the next five years. Susanto manages 30,000 hectares of palm plantations in West Kalimantan, producing 40,000-45,000 tonnes this year. He said that volume is likely to rise 10-15 percent in 2013.
Malaysia and Indonesia account for about 90 percent of the world's annual palm oil production of about 45 million tonnes.
This year, Europe's financial woes coupled with an economic slowdown in top buyers India and China, have cut demand for the edible oil and pushed inventories in second-largest producer Malaysia to record highs. The rising stocks have shaved a quarter off the value of palm oil futures this year, and many analysts at the conference see little let-up in early 2013.
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INFRASTRUCTURE UPGRADE Palm oil stocks in Indonesia, the world's top producer, are more than 4 million tonnes at present and capacity is between 5-6 million tonnes, said Joelianto, trading director at SMART.
To offset falling demand, government officials in Indonesia have called on the palm industry to build bigger storage capacity, and increase domestic use of biofuels.
Joelianto, however, said the biggest challenge to the industry in Indonesia was the lack of bigger waterways and new ports to quickly ship out palm oil and ease high stock levels.
"The government has not done anything concrete yet," said Joelianto, adding that many palm firms were now building their own jetties. "We need more infrastructure, especially deeper ports that can handle bigger volumes." Earlier this month, the Indonesian Vegetable Oil Association said modernising Indonesia's state-owned ports was crucial to handle the rapidly expanding refined palm oil output.
Crude palm oil shipments were also affected by dry weather conditions and falling water levels on a river in West Kalimantan in June. "If Indonesia's palm oil (output) is growing by 2-2.5 million tonnes per year, we must have ports that can handle that kind of volume," Joelianto said.
(Additional reporting by Niluksi Koswanage; Editing by Miral Fahmy) ((michael.taylor@thomsonreuters.com)(+62)(0)(21 3199-7170)(Reuters Messaging: michael.taylor.thomsonreuters.com@thomsonreuters.net)) Keywords: INDONESIA PALM/SMART