Indonesia will impose a ban on palm oil exports in order to lower domestic costs

[ASEAN NOW Content Team]

 

After President Joko Widodo announced a halt to shipments of cooking oil and its raw material on Friday to control surging domestic costs, Indonesia will essentially restrict palm oil exports from April 28 until further notice.

Jokowi, as the president is called, said the policy sought to secure the availability of food supplies at home in a video broadcast.

"I will monitor and analyse the execution of this policy to ensure that cooking oil is abundant and affordable in the home market," he said.

 

After Indonesia announced the embargo, U.S. soyoil futures rose more than 3% to a new high of 84.03 cents per pound.

According to Atul Chaturvedi, head of trade group the Solvent Extractors Association of India (SEA), the decision will harm consumers not only in India, the world's largest importer, but also globally, because palm oil is the world's most consumed oil.

"This is a sad and completely unexpected decision," he remarked.

 

Due to rising demand and weak output from top producers Indonesia and Malaysia, as well as a previous move by Indonesia to restrict palm oil exports in January that was later lifted in March, global prices of crude palm oil, which Indonesia uses for cooking oil, have soared to historic highs this year.

 

Meanwhile, Russia's invasion of Ukraine has disrupted global edible oil markets this year, cutting off shipments of sunflower oil from the region.
Russians refer to their effort as a "special operation."

The Black Sea accounts for 76 percent of global sunoil exports, and since Russian forces invaded Ukraine in February, commercial shipping from the region has been severely hampered.

 

"The sky would be the limit for edible oil prices today," a Mumbai-based trader at a global trading firm said. "Buyers were betting on palm oil after sunoil supply decreased due to the Ukraine crisis," he added.

"At this point, they (customers) have little choice because soyoil supplies are equally restricted."

More than half of the world's palm oil comes from Indonesia.

 

Since 2018, Indonesia has prohibited the issue of new permits for palm oil plantations, which are widely blamed for deforestation and habitat destruction of endangered creatures such as orangutans.

GAPKI, the palm oil industry's trade body, said it was convening to discuss the president's announcement.

In a text message, a GAPKI spokeswoman added, "As citizens, we obey the president's decision."