Indonesia’s palm oil export ban leaves world buyers without Plan B

Mumbai — Global edible oil consumers are up to supply after Indonesia’s sudden ban on palm oil exports has forced buyers to seek alternatives that are already in short supply due to bad weather and Russia’s invasion of Ukraine. There is no choice but to pay.

Industry watchers predict that a move to ban exports from Thursday by the world’s largest palm oil producers will raise prices for all major edible oils, including palm oil, soybean oil, sunflower oil and canola oil. It will put an extra burden on cost-sensitive consumers in Asia and Africa, which have been hit by rising fuel and food prices.

“Indonesia’s decision affects not only palm oil availability, but also vegetable oils around the world,” James Fry, chairman of commodity consultancy LMC International, told Reuters.

Palm oil accounts for nearly 60% of the world’s vegetable oil shipments, from cake and fried fats to cosmetics and cleaning agents, with Indonesia’s top producers accounting for about one-third of total vegetable oil exports. increase. In order to deal with the rise in domestic prices, it announced an export ban until it was notified on April 22nd.

“This is happening when all other major oil export tonnages are under pressure. Soybean oil from the drought in South America. Canola oil from Canada’s devastating rapeseed crops. Due to Russia’s Ukrainian war. “Sunflower oil,” Fry said.

Vegetable oil prices have already risen by more than 50% in the last six months as supply has declined due to Malaysia’s labor shortages and droughts in Argentina and Canada (the largest exporters of soybean and rapeseed oil, respectively).

Buyers wanted the harvest of bumper sunflowers from Ukraine, the top exporter, to ease tensions, but supply from Kyiv has ceased as Russia calls it a domestic “special operations”. bottom.

This has led importers to use palm oil, which can fill supply gaps, until Indonesia’s shock ban causes “double pain” to buyers.

There is no alternative

Importers such as India, Bangladesh and Pakistan are trying to increase their purchases of palm oil from Malaysia, but Chaturvedi says the world’s second-largest palm oil producer cannot fill the gap created by Indonesia. rice field.

Indonesia usually supplies almost half of India’s total palm oil imports, while Pakistan and Bangladesh import nearly 80% of palm oil from Indonesia.

“No one can compensate for the loss of palm oil in Indonesia. Rasheed Jan Mohd, Chairman of the Association of Cooking Oil Refiners (PEORA) in Pakistan, said:

In February, the price of vegetable oil reached a record high as the supply of sunflower oil from the Black Sea region was cut off.

A Mumbai-based dealer with a global trading company said the rise in prices raised working capital requirements for oil refiners who held lower-than-usual inventories in anticipation of price declines.

Instead, all oil prices have risen further.

“The refiners were caught on the wrong foot. Now they can’t afford to wait a few weeks. They have to buy to run the plant,” the dealer said.

Dhaka-based refiners say that consuming countries will have sufficient supply in the first half of May as Indonesia allows loading until April 28, but may face shortages from the second half of the year. I am saying.

He said South Asian refiners only slowly release oil to the market because they know that supply is limited.

In India, the world’s largest importer of vegetable oil, palm oil prices rose nearly 5% over the weekend. This is due to industry price shortages in the coming months. Prices have also risen in Pakistan and Bangladesh.

By Rajendra Jadhav