Indonesia, top palm oil exporter, to ban exports from Thursday

  • Indonesia, the top palm oil exporter, plans to ban exports from Thursday.
  • Palm oil is the most widely used vegetable oil in the world for cooking and a wide range of consumer products.
  • Prices for palm oil and competing soybean oil jumped on news of the ban.

The world’s largest producer of palm oil has announced it will ban exports of the product from Thursday, sending prices of competing vegetable oils skyrocketing.

Indonesia accounts for about half of the world’s supply of palm oil, the world’s most widely used vegetable oil. Palm oil is used for cooking and for the production of thousands of consumer products, including cookies, detergents and lipsticks.

In a video statement on Friday, the Indonesian President Joko Widodo said the move was aimed at lowering domestic palm oil prices and ensuring national food availability in the wake of 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 abundant and affordable,” Widodo said, per a Reuters Translation.

The move comes as Indonesia has seen recent protests over high cooking oil prices, with retail prices rising more than 40% so far this year, according to Reuters.

The ban is expected to be in place until further notice. Indonesian palm oil exports are worth about $30 billion a year, data provider says Statistical.

Indonesian Finance Minister Sri Mulyani Indrawati said Reuters on Friday, the ban on palm oil would hurt other countries, but that it was necessary to contain the surge in domestic cooking oil prices.

Benchmark crude palm oil futures on the Bursa Malaysia stock exchange jumped 7% on Monday morning. They are up more than 40% since the start of the year.

Prices for alternative vegetable oils have also soared in response to Indonesia’s impending ban on palm oil exports. Chicago soybean oil benchmark prices hit their highest levels since 2008, Reuters records show.

Edible oil prices – including palm oil – have risen due to the war in Ukraine, as the country is a major exporter of sunflower oil. “Edible oils are often interchangeable, so a shortage of one type puts pressure on others,” intelligence GRO, a global agricultural data analytics company, wrote in an April 23 note.

Vegetable oil price increases are outpacing overall food price increases, GRO Intelligence writes in the report. US 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 further fuel global food inflation,” the company added.

Edward N. Arrington