Indonesia to ban palm oil exports to curb domestic prices


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

Register now for FREE unlimited access to Reuters.com

  • Ban ‘totally unexpected’ – India trade group
  • Govt under pressure to control cooking oil prices
  • Global prices at records this year after Indonesian curbs
  • Edible oils markets roiled by Ukraine conflict; few replacements

JAKARTA, April 22 (Reuters) – Indonesia will effectively ban palm oil exports from April 28, until further notice, after President Joko Widodo on Friday announced a halt of shipments of cooking oil and its raw material to control soaring domestic prices.

The measure could further inflame global food inflation that soared to a record high following Russia’s invasion of Ukraine, raise costs for packaged food producers and force governments to choose between using vegetable oils in food or for biofuel.

In a video broadcast, Jokowi, as the president is popularly known, said the policy aimed at ensuring availability of food products at home in the world’s top palm oil producer and exporter.

Register now for FREE unlimited access to Reuters.com

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

Soybean oil prices on the Chicago Board of Trade rose 4.5% to a record high of 83.21 cents per pound. read more

The move will hurt consumers not only in biggest buyer India but globally, as palm is the world’s most consumed oil, Atul Chaturvedi, president of trade body the Solvent Extractors Association of India (SEA), told Reuters.

“This move is rather unfortunate and totally unexpected,” he said.

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

Household product and food companies including Procter & Gamble Co (PG.N), Nestle SA (NESN.S) and Unilever PLC are large purchasers of palm oil. Oreo cookie maker Mondelez International Inc (MDLZ.O) accounts for .5% of palm oil consumption globally, according to its website.

Global edible oil prices have soared to all-time highs in 2022 on supply shocks

Meanwhile, global edible oil markets have also been roiled this year by Russia’s Ukraine invasion, which cut off shipments of sunflower oil from the region. Russian calls its action a “special operation”. Ukraine and its Western allies call it an unprovoked attack.

The Black Sea accounts for 76% of sunoil exports and commercial shipping from the region has been severely affected since Russian forces entered Ukraine in February. read more

Large supplies of alternatives including soy and rapeseed oil are not readily available either.

Argentina, the world’s top exporter of processed soy, briefly halted new overseas sales of soy oil and meal in mid-March before hiking the export tax rate on soy oil and meal to 33% from 31% in a bid to tamp down domestic food inflation . Drought curbed its soybean harvest, limiting supplies.

New facilities for processing soy and canola oil are expected to open in the United States and Canada respectively in coming years, but ramping up production in the near term will be difficult.

“Sky would be limit for edible oil prices now. Buyers were banking on palm oil after sunoil supplies fell because of the Ukraine war,” a Mumbai-based dealer at a global trading firm said.

“Now they (buyers) don’t have any option as soyoil supplies are also limited.”

Indonesia counts for more than half of global palm oil supply. Malaysian producers say the world’s second largest palm oil exporter, which is facing a production shortfall due to a pandemic-induced labor shortage, is unlikely to be able to plug the supply gap left by Indonesia.

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

Palm oil industry association GAPKI said it would adhere to the policy but asked for government re-evaluation of the ban should it hurt the sector.

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

In Indonesia, the retail price of cooking oil averages 26,436 rupiah ($1.84) per liter, up more than 40% so far this year. In some provinces across the country, the prices have nearly doubled in the past month alone, according to a price monitoring page.

Demonstrations by students have taken place in several cities across Indonesia in recent days over high cooking oil prices.

Indonesia’s government has set a cap of 14,000 rupiah per liter for bulk cooking oil, but Trade Ministry data showed that it was sold at more than 18,000 rupiah this month.

A government investigation is underway into alleged corruption in the issue of sought-after export permits. read more

($1 = 14,356,0000 rupiah)

Register now for FREE unlimited access to Reuters.com

Reporting by Fransiska Nangoy; Additional reporting by Rajendra Jadhav in Mumbai; Mark Weinraub in Chicago; Uday Sampath in Bengaluru and Jessica DiNapoli in New York; and Maximilian Heath in Buenos Aires; Writing by Fransiska Nangoy and Caroline Stauffer Editing by Kanupriya Kapoor, Martin Petty, Jane Merriman and Jonathan Oatis

Our Standards: The Thomson Reuters Trust Principles.

.



Source link

Leave a Reply

Your email address will not be published.