Derom Bangun, head of the Indonesian Palm Oil Association, predicted that increased production and acreage was allowing suppliers in the country to offset the effects of drought,
He was quoted in an interview with the The Star newspaper in Malaysia, a major competitor to Indonesia.
If the estimates prove to be correct, news of increased supply will be welcomed within both the bakery and snack industries, which have faced recent uncertainty over prices for palm oil coming from the region.
Palm oil is found in a diverse range of products including bread, crisps and margarine. The product is currently enjoying strong appeal as an ingredient because it is free of artery-clogging trans fats, formed when fats are hydrogenated to make them more solid and extend their shelf life.
According to figures from the US Department of Agriculture (USDA), global palm oil consumption in 2006 increased by 6.6 per cent to 35.3m tonnes. This trend is expected to continue in 2007 with an estimated 5.5 per cent consumption rise.
With demand for the oil rising, the news of Indonesia's increased yield will be even more pertinent for processors, as rival producer Malaysia has seen difficulties in keeping up with demand.
Last month, Malaysian palm oil futures hit an eight year high as rampant demand by food and biofuels processors further depleted its stocks. On 12 April the futures hit 2,205 Malaysian ringgit (€473) tonne, as an industry body warned that the country's stocks were at a 19 month low.
While the food industry may welcome the increased production, not all are happy with the growing reliance of global consumers on palm oil.
Environmental groups are concerned that the growing interest in the oils is resulting in the destruction of wildlife. According to pressure group Friends of the Earth (FoE), over 89 per cent of all palm oil is produced in Malaysia and Indonesia, to the detriment of both countries' natural resources.
