Indonesia Bans Palm Oil Exports as Global Food Inflation Rises

  • ‘Totally unexpected’ ban: India trade group
  • US urges cooperation instead of export bans
  • Indonesian government under pressure to control cooking oil prices
  • World prices hit records this year after Indonesian restrictions
  • Conflict-Agitated Edible Oil Markets in Ukraine; few replacements

JAKARTA, April 22 (Reuters) – Indonesia, the world’s top producer of palm oil, announced plans on Friday to ban exports of the most widely used vegetable oil, in a shocking move that could further inflame rising global food inflation.

Suspending shipments of cooking oil and its raw material, widely used in products ranging from pastries to cosmetics, could raise costs for global packaged food producers and force governments to choose between using oils vegetables into food or biofuels. Indonesia has more than half of the world’s supply of palm oil.

In a video broadcast, Indonesian President Joko Widodo said he wanted to ensure the availability of food products in the country, after global food inflation spiked to a record high following Russia’s invasion of the top producer. of crops, Ukraine. read more

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

The announcement will hurt consumers in India’s top buyer and around the world, said Atul Chaturvedi, president of the Indian Solvent Extractors Association (SEA) trade body.

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

Alternative vegetable oil prices soared in response to the measure that will take effect on April 28. Soybean oil, the second most widely used vegetable oil, rose 4.5% to a record high of 83.21 cents a pound on the Chicago Stock Exchange. read more

World prices for crude palm oil, which Indonesia uses for cooking, hit record highs this year amid surging demand and weak production from major producers in Indonesia and Malaysia, in addition to a move by Indonesia to restrict palm oil exports. palm oil in January that was eliminated in March.

Food and household products companies, including Procter & Gamble Co. (PG.N)Nestle SA (NESN.S) and Unilever PLC are big buyers of palm oil. Oreo cookie maker Mondelez International Inc (MDLZ.O) it accounts for 0.5% of palm oil consumption globally, according to its website.

Other countries have experimented with crop protectionism to try to keep domestic prices low. Argentina, the world’s top exporter of processed soybeans, briefly halted new foreign sales of soybean oil and meal in mid-March before raising the export tax rate on those products from 31% to 33%.

The US Department of Agriculture urged international cooperation during the war in Ukraine, rather than export bans.

Global edible oil prices have soared to record highs in 2022 due to supply shocks

World edible oil markets have been rocked this year by Russia’s invasion of Ukraine, a move Russia calls a “special operation” to demilitarize its neighbor, which cut off shipments of sunflower oil from the region.

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

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

Nor are there large supplies of alternatives, such as soybeans and rapeseed oil, after droughts damaged more recent crops in Argentina, Brazil and Canada.

New soybean and canola oil processing facilities are expected to open in the United States and Canada, respectively, in the coming years as demand for plant-based biofuels grows, but it will be difficult to increase production in the short term. .

Industry group Clean Fuels Alliance America said the move could hurt biofuel producers, even though US producers of biodiesel and renewable diesel do not use palm oil, as supplies of all oils are in short supply.

“The sky would be the limit for edible oil prices now. Buyers relied on palm oil after solar oil supplies fell due to the Ukraine war,” a Mumbai-based trader at a trading firm said. global.

“Now they (buyers) have no choice as soybean oil supplies are also limited.”

Malaysian growers say the world’s No. 2 palm oil exporter, facing a production shortfall due to pandemic-induced labor shortages, is unlikely to be able to close the gap.

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

The palm oil industry association GAPKI said it would adhere to the policy but had reservations.

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

In Indonesia, the retail price of cooking oil averages Rs 26,436 ($1.84) per liter, an increase of more than 40% year-to-date. In some provinces of the country, prices have almost doubled in the last month alone, according to a price tracking page.

Student demonstrations have been held in several Indonesian cities in recent days over high prices for cooking oil.

The Indonesian government has set a limit of Rs 14,000 per liter for bulk cooking oil, but data from the Ministry of Commerce shows it sold for more than Rs 18,000 this month.

A government investigation into alleged corruption related to requested export permits is underway. read more

($1 = 14,356,000 rupees)

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Information from Fransiska Nangoy; Additional reporting by Rajendra Jadhav in Mumbai; Mark Weinraub in Chicago; Uday Sampath in Bangalore; Jessica DiNapoli and Stephanie Kelly in New York; Maximiliano Heath in Buenos Aires; and Mei Mei Chu in Kuala Lumpur; Written by Fransiska Nangoy and Caroline Stauffer Edited by Jonathan Oatis and Elaine Hardcastle

Our standards: The Thomson Reuters Trust Principles.

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