Indonesia Bans Palm Oil Exports – 25th April 2022 UPDATED

Update from Reuters

JAKARTA, April 25 (Reuters) – Indonesia’s agriculture ministry said on Monday that crude palm oil shipments would be excluded from a planned palm oil export ban, according to a copy of an official letter sent to local government leaders.

The letter, which was verified by a ministry official, said the ban would however include refined, bleached and deodorized (RBD) palm olein.

It was still unclear on Monday whether products such as RBD palm oil and palm stearin would be affected.

Palm oil prices increased today after top producer Indonesia said on Friday it would ban all exports of cooking oil from April 28, 2022.

This is likely to increase global food inflation and further affect volatility in crop markets still reeling from the war in Ukraine.

Indonesia, which accounts for a third of global edible oil exports, says the ban will last until the government decides the current domestic shortage is over, which has caused civil unrest that instigated the ban.

The ban may just last one month as local supplies increase and costs drop – but a loss of 30% for a month will have a longer-term effect on market prices.

Palm oil futures jumped as much as 7% in early trading as did other edible oils, including coconut.

What this means in the longer term is unsure; other countries may well follow their protectionist measures to ensure local supply.

We have already seen major UK companies like Iceland switch to Palm Oil from Sunflower because of Ukraine, and further shortages and price rises will continue throughout 2022 and beyond.

Losing potentially up to 10% of the world’s edible market production was always going to present some big issues. But in the last few weeks, buyers seem to have forgotten that we are yet to really feel the impact of the war in Ukraine. Whilst stories of cooking oil scarcity have been in the press and even some sales outlets limiting sales we have not really seen the impact beyond a slight upping of edible oil price complex. Indonesia’s announcement last week though is the first real major indication of the loss of maybe 18-20 million metric tonnes of edible oils. And its key not to lose sight that this may be the first country of several that will now limit exports to protect their domestic population from shortages.

Manufacturers can produce either desiccated coconut or coconut oil. You can remove some of the oil from the meat and desiccate the rest but that result has less flavour and performs differently in end products quite often making a lower quality product. There is a fundamental issue that buyers are ignoring at the moment is that demand for edible oils is far greater than desiccated and there is only so much coconut available. How long before it is not an issue of price but actual availability? The second half of this year could see real supply issues.