Indonesia bans palm oil exports to curb domestic prices

People shop for cooking oil made from oil palm at a supermarket in Jakarta, Indonesia, March 27, 2022. REUTERS/Willy Kurniawan

JAKARTA (Reuters) – Indonesia will effectively ban palm oil exports from April 28 until further notice after President Joko Widodo on Friday announced a halt to shipments of cooking oil and raw materials to control rising domestic prices.

In a video broadcast, Jokowi, as the president is known, said the policy is to ensure the availability of food products in the home.

“I will monitor and evaluate the implementation of this policy so that cooking oil becomes abundant and affordable in the local market,” he said.

US soybean oil futures jumped more than 3% to a record high of 84.03 cents a pound after Indonesia announced the ban.

Atul Chaturvedi, head of the Solvent Extractors Association of India, told Reuters that the move would harm consumers not only in India, the largest buyer, but globally because palm is the most consumed oil in the world.

“This move is somewhat unfortunate and completely unexpected,” he said.

Global prices for crude palm oil, which Indonesia uses for cooking oil, have risen to record levels this year amid rising demand and weak production from major producers Indonesia and Malaysia, as well as an earlier move by Indonesia to restrict palm oil exports in January that was later. Lifted in March.

Meanwhile, global edible oil markets have also been affected this year by the Russian invasion of Ukraine, which cut off shipments of sunflower oil from the region. Russia described her work as a “special operation”.

The Black Sea accounts for 76% of the world’s exports of sun oil and commercial shipping from the region has been severely affected since Russian forces entered Ukraine in February. Read more

“Sky will have limited edible oil prices now. Buyers were dependent on palm oil after sun oil supplies plummeted due to the Ukraine war,” said a Mumbai-based trader at a global trading firm.

“Now they (the buyers) have no choice because soy oil supplies are also limited.”

Indonesia has more than half of the world’s palm oil supply.

Indonesia since 2018 has stopped issuing new permits to palm oil plantations, often blamed for deforestation and destroying the habitats of endangered animals like orangutans.

The Palm Oil Industry Association Japkei said it would stick to the policy but asked for the government to reassess the ban if it hurts the sector.

“If this policy has any negative impact on the sustainability of the palm oil sector, we will ask the government to re-evaluate the policy,” she said in a statement.

In Indonesia, the average retail price of cooking oil was 26,436 rupees ($1.84) per liter, up more than 40% so far this year. In some counties across the country, prices have nearly doubled in the past month alone, according to the Price Watch page.

Students have held demonstrations in several cities across Indonesia in recent days due to rising cooking oil prices.

The Indonesian government has set a cap of 14,000 rupiah per liter for bulk cooking oil, but data from the Ministry of Commerce showed it was sold at more than 18,000 rupiah this month.

A government investigation is underway into allegations of corruption in the issue of required export permits. Read more

(dollar = 14,356.0000 rupees)

Report by Francesca Nangue preparation; Additional reporting by Rajendra Jadhav in Mumbai Editing by Kanupriya Kapoor, Martin Petty and Jane Merriman

Our criteria: Thomson Reuters Trust Principles.