Indonesia, the world’s largest exporter of cooking oils, will expand its export ban to include crude palm oil, adding to uncertainty in a market that has seen skyrocketing price volatility and threatens to worsen global inflation. food.
The ban will extend to crude palm oil, RBD palm oil, and used cooking oil, Coordinating Minister for Economy Airlangga Hartarto said at a briefing on Wednesday. A day earlier, he had said that the closure would only apply to palm olein. The policy will start on April 28 and last until domestic cooking oil prices fall.
Indonesia’s export policy has brought down the palm oil industry. Prices were skewed, rising at a time when traders feared the ban would cover all products due to a lack of detail in the original statement, and plummeting the next time details emerged that the measure would be limited to certain refined products. Futures contracts were up 10% just before the latest announcement.
It is another example of a political shift that has raised concerns about Indonesia’s business image. The country is a major supplier of raw materials and has imposed export restrictions on nickel and coal in the past. Speculation about what Indonesia might do next has the industry on its toes.
Palm oil is processed and shipped in different ways. The fleshy, red fruits of the oil palm are crushed to obtain crude palm oil. The product can be refined, bleached, and deodorized to remove impurities. Further processing produces palm olein, the most widely used edible oil in the world. Non-edible oils are used to make biodiesel and soap.
The move by Indonesia, which accounts for a third of the world’s cooking oil exports, is contributing to a wave of crop protectionism around the world since the start of the war in Ukraine, as governments seek to protect their own supplies from food amid rising farm prices. The ban threatens to fuel food inflation, which has been rising at a rapid rate, and raises the risk of a true hunger crisis.
“Now we will enter a new bullish era where the shortage of cooking oil will increase globally,” said Abdul Hameed, sales manager at Manzoor Trading in Pakistan. “Many countries will have to rely on their own culture and use national resources. There could be more crop protection.
Local shortages of cooking oils have rocked Indonesia, prompting street protests over high food prices and the suspension of official trade in a corruption case. The turmoil has become a major political issue for President Joko Widodo, as cooking oil prices could drive up the prices of other groceries ahead of the Eid al-Fitr holiday, which is usually marked by parties and celebrations. .
“Once local needs are met, I will certainly lift this export ban because I understand how much the government needs taxes, needs foreign revenue and needs a trade surplus,” the president known as Jokowi said. “People’s needs are our top priority.
Futures for July delivery had earlier breached the trading limit in Kuala Lumpur by 10% before closing at their highest levels since March 9. The market extended gains during the overnight trading session, rising as much as 2.1%. Soybean oil, palm’s closest rival, rose 4% to a new high in Chicago.