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Indonesia ban on palm oil exports starting April 28 rattles Indian markets

The country meets almost 45% of India's annual palm oil demand; media reports say ban put in place to check soaring domestic prices of the commodity

Topics
edible oil  | Exports | Indonesia

Sanjeeb Mukherjee & Agencies  |  New Delhi 

edible oil
(Photo: iSTOCK)

In what could have a devastating impact on prices and supplies in India, Indonesia, which is the world’s largest producer of palm oil and meets nearly 45 per cent of the total palm oil supplied into India annually, has decided to ban from April 28 till further notice.

The as per media reports has been halted to check soaring domestic prices of palm oil which has created a scenario of unrest in the country.

India imports around 13-13.5 million tonnes of edible oils every year, of which around 8-8.5 million tonnes (around 63 per cent) is palm oil.

Of this, 8-8.5 million tonnes of palm oil, almost 45 per cent comes from and the remaining from neighboring Malaysia.

Trade sources said if suddenly, monthly supplies of around 300,000-325,000 tonnes of palm oil stop from May onwards it will cause a sharp escalation in prices which have been already on the boil due to the ongoing Russia- Ukraine crisis.

“Ever since the Russia-Ukraine crisis, India’s sunflower oil supplies have gone down from 200,00-250,000 per month to less than 100,000 tonnes per month causing a sharp spike in prices. On top of this, if now decides to suspend palm oil exports, then it will cause serious trouble for us,” warned B.V. Mehta, Director General of Solvent Extractors’ Association of India (SEA).

Mehta said, India should immediately activate its diplomatic channels to ward off this catastrophe.

The landed price of crude palm oil in Mumbai till April 14th, is already 51 per cent more than the year-ago period as per latest trade data.

“The ban will not only impact us but also every other country in the world which is dependent on for palm oil,” Mehta said.

The world annually consumes around 240 million tonnes of edible oils, of which almost 80 million tonnes (34 per cent) is palm oil.

Indonesia ban on palm oil exports starting April 28 rattles Indian markets

Of this almost 50 million tonnes comes from Indonesia.

As per trade sources, Indonesia’s domestic palm oil consumption is around 20 million tonnes, leaving the rest for .  

Meanwhile, agency Reuters said that Indonesian President Joko Widodo on Friday announced a halting of shipments of cooking oil and its raw material to control soaring domestic prices from April 28.

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

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

U.S. soyoil futures jumped more than 3% to a record high of 84.03 cents per pound after Indonesia announced the ban.

"Sky would be the limit for 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.

Indonesia has since 2018 stopped the issuance 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 was meeting about the president's announcement.

"As citizens, we obey the decision by the president," a spokesperson for GAPKI said in a text message.

In Indonesia, the retail price of cooking oil averages out at 26,436 rupiahs ($1.84) per litre, 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. 

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First Published: Fri, April 22 2022. 21:28 IST
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