Palm oil fruits at a plantation in Meulaboh, Aceh province in Indonesia’s North Sumatra island (AFP/Archives/CHAIDEER MAHYUDDIN)
Indonesia began Thursday to suspend all its palm oil exports, of which the country is the world’s largest producer, at the risk of destabilizing a vegetable oil market already at its highest since the war in Ukraine.
The Southeast Asian archipelago has been facing a shortage and soaring prices of palm oil-based cooking oil on its domestic market for several months and fears a rise in social tensions.
In a last-minute reversal on Wednesday evening, authorities clarified that the suspension would affect all oilseed exports, not just products for edible oils, as reported a day earlier.
“All products”, including crude palm oil “are covered by a decree of the Ministry of Commerce”, indicated the coordinating minister for the Economy Airlangga Hartarto on Wednesday evening, specifying that the ban will come into force at midnight.
The price of crude palm oil jumped nearly 10% on Wednesday before the start of the embargo on the Kuala Lumpur Stock Exchange, a jump of 63% over one year.
Indonesian President Joko Widodo stressed that supplying the population was “the highest priority”.
“As the biggest producer of palm oil, it is ironic that we have difficulty obtaining cooking oil,” he acknowledged, calling on producers to cooperate.
The country of 270 million inhabitants suffers from problems of distribution and retention of stocks while producers prefer to sell their shipments internationally to take full advantage of the rise in prices.
Jakarta plans to resume exports when the wholesale price of cooking oil drops to 14,000 rupees (97 cents) in the archipelago, after soaring 70 percent in recent weeks.
– Long queues –
The supply of palm oil, the main oil used in the archipelago for cooking, has been problematic since the beginning of the year. The most modest consumers often had to wait for hours in long queues in front of the distribution centers of oil at subsidized prices in many cities.
“Cooking oil is hard to find, even in bulk,” Lius Antoni, a consumer, told AFP. “Finally I decided to reduce my consumption (…) so as not to have to queue or fight” trying to buy it.
For Ade Neni, seller of “gorengan”, fried foods that Indonesians love, it’s a blow. “High oil prices reduced my sales, I had to raise the price of my gorengan,” she says as not only oil but soybeans rose.
Public dissatisfaction with rising food prices has contributed to a decline in the president’s popularity, according to recent polls, and sparked protests in several cities.
Eddy Hartono, head of the Indonesian Association of Palm Oil Producers, regrets that these measures have already caused a drop in the income of plantation operators. “There is no problem of supply, but of distribution,” he insists.
Indonesia accounts for some 60% of world palm oil production, one third of which is consumed on its domestic market.
It exported 34.2 million tonnes last year for edible oil but also for the manufacture of a wide range of products, from cosmetics to food products.
“The countries most affected (by the suspension) are India, China, Bangladesh and Pakistan” for their food consumption, underlines Bhima Yudistira, economist at the Center for Economic and Legal Studies (Celios).
He points out that Indonesia risks having to pay penalties for breach of contract, and even prosecution before the World Trade Organization (WTO) if this ban is prolonged.
Edible oils had already hit all-time highs in March due to insufficient global supplies following Russia’s invasion of Ukraine, two major sunflower oil-producing countries.
© 2022 AFP
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