People buy palm oil cooking oil in a supermarket in Jakarta, Indonesia, March 27, 2022. REUTERS / Willy Kurniawan
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- Prices of all vegetable oils will jump due to supply disruptions
- Buyers can’t make up for the shortage of Indonesian palm oil
- Supply of soybean oil, rape affected by drought, war sunflower oil
- Refineries with lower reserves have to buy at record prices
MUMBAY, April 25 (Reuters) – Global edible oil consumers have no choice but to pay the best dollar for supplies after Indonesia’s surprise ban on palm oil exports forced buyers to look for alternatives already in short supply. adverse weather conditions and the Russian invasion of Ukraine.
The move by the world’s largest palm oil producer to ban exports from Thursday will raise the prices of all essential edible oils, including palm oil, soybean oil, sunflower oil and rapeseed oil, industry observers predict. This will put additional pressure on cost-sensitive consumers in Asia and Africa, affected by higher fuel and food prices. Read more
“Indonesia’s decision affects not only the availability of palm oil, but also vegetable oils worldwide,” James Fry, chairman of commodities consulting firm LMC International, told Reuters.
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Palm oil – used in everything from pastries and frying fats to cosmetics and cleaning products – accounts for almost 60% of the world’s vegetable oil supply, and Indonesia’s leading producer accounts for about a third of all vegetable oil exports. He announced the export ban on April 22nd, pending a further order to tackle rising domestic prices. Read more
“This happens when the export tonnages of all other essential oils are under pressure: soybean oil due to the drought in South America; rapeseed oil due to the catastrophic rapeseed harvest in Canada; and sunflower oil because of Russia’s war against Ukraine, “Fry said.
Vegetable oil prices have already risen by more than 50% in the last six months, as factors from labor shortages in Malaysia to droughts in Argentina and Canada – the largest exporters of soybean oil and rapeseed oil respectively – have limited supplies. . Read more
Global edible oil prices reach record levels as each major oil drops in supply
Buyers had hoped that the sunflower harvest from Ukraine’s largest exporter would ease tensions, but supplies from Kyiv have stalled because of what Russia calls a “special operation” in the country. Read more
This has led importers to rely on palm oil to fill the supply gap until Indonesia’s shock ban “doubles” buyers, said Atul Chaturvedi, president of the trade body of the Indian Solvent Extraction Association (SEA).
Importers such as India, Bangladesh and Pakistan will try to increase purchases of palm oil from Malaysia, but the world’s second-largest palm oil producer cannot fill the gap created by Indonesia, Chaturvedi said.
Indonesia typically supplies almost half of India’s total palm oil imports, while Pakistan and Bangladesh import nearly 80% of their palm oil from Indonesia.
“No one can compensate for the loss of Indonesian palm oil. “Every country will suffer,” said Rashid Jan Mohd, chairman of the Pakistani Association for the Refining of Edible Oils (PEORA).
Key global statistics on edible oils
In February, vegetable oil prices jumped to record highs as sunflower oil supplies were cut off by the Black Sea region.
Rising prices have raised working capital requirements for oil refineries, which have kept inventories lower than normal in anticipation of falling prices, said a Mumbai-based dealer of a global trading company.
Instead, all oil prices rose further.
“Refineries have been caught on the wrong foot. Now they can’t afford to wait a few weeks. They have to make purchases to run plants,” the dealer said.
As Indonesia allows loading by April 28, consumer countries will have enough supplies for the first half of May, but may face shortages in the second half, said a Dhaka-based refiner.
South Asian refineries will be slow to launch oil because they know supplies are limited, he said.
In India, the world’s largest importer of vegetable oil, palm oil prices rose by nearly 5% over the weekend as industrial prices were in short supply in the coming months. Prices have also risen in Pakistan and Bangladesh.
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Report by Rajendra Jadhav; Edited by Gavin Maguire and Kenneth Maxwell
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