Indonesia's Palm Oil Export Ban Lifted After It Backfired and Caused Domestic Prices to Crash
After just three weeks, Indonesia announced it's lifting its ban on palm oil exports. The move was expected by S&P Global Commodity Insights, saying there was no shortage of palm oil supplies when the original announcement was made.
According to Reuters, President Joko Widodo on Thursday said the supply of bulk cooking oil has reached a level greater than needed, so Indonesia will lift its short-lived palm oil export ban. Indonesian officials said the move was due to improvements in its domestic cooking oil supply.
"In several regions I know prices of cooking oil were still relatively high, but I believe in coming weeks they will be more affordable," Jokowi, as the president is known, said in a video statement according to Reuters.
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While industry groups had warned the palm oil sector would suffer, with grind virtually coming to a halt due to the ban, S&P Global Commodity Insights wasn’t as concerned, saying there was no reason for the initial ban.
“The attempt by the Indonesian government to lower domestic prices by banning exports has apparently failed,” Peter Meyer of S&P Global Commodity Insights said in response to the export ban being lifted. “The reality is that Indonesia is now over-supplied domestically, causing palm oil prices to fall there while world vegetable oil tightness has left other prices elevated. While expected, the reversal does offer some relief to global vegetable oil prices.”
Meyer provided this graphic in April, which showed palm oil supplies for the 2021/2022 year are actually above the previous year, and considerably higher when compared to historical levels.
Meyer said the export ban that took effect April 28th, wasn’t the first time Indonesia tried to make such a move, but banning palm oil exports was a decision that could backfire and hurt Indonesia’s economy.
“A long-term ban could severely damage Indonesia’s economy given its reliance on palm oil exports. Additionally, this is not the first time Indonesia has announced this type of action since the war started in Ukraine, only to reverse course quickly,” he said.
Meyer said Indonesia’s export ban in April sparked a bigger concern regarding what it would mean for world trade considering the largest supplier of sunflower oil, Ukraine, is also facing an uncertain supply situation as the war continues.
The Black Sea region accounts for 60% of the world’s sun oil output, as well as 76% of exports. Considering so much of the world’s supplies comes from an area partially under siege, the uncertainty caused global vegetable prices to hit record highs already this year.
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