Indonesia is the world’s largest exporter of palm oil.Azwar Ipank/AFP via Getty Images
The leading palm oil exporter Indonesia plans to ban exports from this Thursday.
Palm oil is the world’s most commonly used vegetable oil, used in cooking and a wide range of consumer products.
Palm oil and competing soybean oil prices are jumping on news of the ban.
The world’s largest palm oil producer announced that it would ban exports of the raw material from Thursday, which will drive up prices for edible oils.
Indonesia accounts for about half of the world’s supply of palm oil, the world’s most commonly used vegetable oil. Palm oil is used in cooking and in the manufacture of thousands of consumer products, including cookies, laundry detergent and lipstick.
In a video statement on Friday, the Indonesian President Joko Widodo said the move was aimed at reducing domestic palm oil prices and ensuring domestic food availability amid global food inflation.
“I will monitor and evaluate the implementation of this policy so that the availability of cooking oil in the domestic market becomes plentiful and affordable,” Widodo said, according to a Reuters translation.
The move comes as Indonesia has recently seen protests over high cooking oil prices, with retail prices up more than 40% so far this year, according to Reuters.
The ban is expected to apply until further notice. According to data provider Statista, Indonesian palm oil exports are worth about US$30 billion in 2021.
Indonesia’s Finance Minister Sri Mulyani Indrawati told Reuters on Friday the palm oil ban would hurt other countries but was necessary to curb rising domestic cooking oil prices.
Benchmark crude palm oil futures on the Bursa Malaysia Stock Exchange rose as much as 7% on Monday morning. They’re up over 40% year-to-date.
Alternative vegetable oil prices also rose in response to Indonesia’s forthcoming palm oil export ban. Benchmark soybean oil prices in Chicago hit their highest since 2008, Reuters records show.
The story goes on
Cooking oil prices – including palm oil – have risen due to the war in Ukraine, as the country is a large exporter of sunflower oil. “Edible oils are often interchangeable, so a shortage of one puts pressure on the others,” wrote GRO Intelligence, a global agricultural data analytics firm, in an April 23 note.
Gains in vegetable oil prices outpaced overall food price increases, GRO Intelligence wrote in the report. U.S. prices for a basket of common vegetable oils are up 41% year-on-year, while food prices are up 25% year-on-year.
“Indonesia’s export ban is likely to fuel global food inflation further,” the company added.
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