In its latest policy flip-flop, Indonesia on Wednesday said it will expand its ban on export of palm oil to crude oil palm, setting off the palm oil market virtually afire.

The announcement coming around noon in Jakarta time from the country’s Coordinating Minister for Economic Affairs, Airlangga Hartarto, saw crude palm oil July contracts soaring by 10 per cent past 7,000 Malaysian ringgits to 7,001 a tonne (₹1.23 lakh) on Bursa Malaysia Derivatives. This is the highest level the edible oil has increased to after March 9.  

In a briefing, Hartarto, said the ban on the export of palm oil will include crude palm oil, RBD palm oil and used cooking oil. The ban will come into effect from Thursday (April 28) and will last until domestic cooking oil prices ease, which some Indian buyers see as short-term.

‘Short-term affair’

“We don’t estimate this ban to be long-term. Therefore, the market will witness a correction. But May looks very bullish. The premium of soya and sunflower refined oil over palm oil will narrow down. The overall price outlook is strong till August-September; that is, till next crop arrives in the market,” said Sougata Niyogi, CEO – Oil Palm, Godrej Agrovet Limited.

 BV Mehta, Executive Director of Solvent Extractors’ Association of India (SEA), told BusinessLine that Indonesia has sent shivers to the whole world. Now the prices of edible oils are set to go up drastically because of this move. India has to live with high prices of edible oil, and the government will have a tough time now.

With the Indian Government having implemented various measures, from lowering import duty to impressing producers to cut down their margins, options to tackle the situation could be limited.

However, industry sources said processors had stocks that could last them till May-end. India is also reported to be in touch with Indonesia on developments with regards to crude palm oil. 

April 25 clarification

On April 22, Indonesian President Joko Widodo announced the suspension of all cooking oil and raw material exports from April 28 until further orders. However, on April 25, it clarified that its export ban, which was to come into force from April 28, will not cover palm oil.. 

This provided relief to importing nations such as India that depend on imports of edible oils to meet their domestic demand.

Mehta said Indonesia is holding around 5 million tonnes (mt) of stocks of palm oil.  In addition, it produces around 4 mt additional oil every month. “It could have suspended its biodiesel programme for the time being,” he said. 

The SEA Executive Director said the price of palm oil, which was around $500 a tonne two years ago, has gone up to $1,800 a tonne now. This is an increase of over three times in a matter of two years. 

According to SEA data, CPO import from Indonesia to India was 5.01 lakh tonnes (lt) during November-March of the current oil year as against 12.95 lt in the corresponding period a year ago. Import of RBD palmolein from Indonesia to India increased to 4.72 lt during the period against 4,900 tonnes a year-ago.

Prices on the rise

Edible oil prices have been consistently rising over the past year with the Russia-Ukraine war further complicating the scenario. Ukraine and Russia are the major producers of sunflower oil in the world. The war between them has affected the supply of sunflower oil to the global market.

On the other hand, soyabean production was affected due to weather factor in South America.

Niyogi said the current conditions will keep oilseed farmers’ morale high and fuel rapid area expansion across major oil-producing States.

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