Prices for edible oils such as soybean, sunflower and rapeseed oil are expected to rise after Indonesia announced a surprise ban on palm oil exports, experts warned.
Essential edible oils are already in short supply due to unfavorable weather and Russia’s invasion of Ukraine. Indonesia’s move to pause exports will put additional strain on cost-sensitive consumers in Asia and Africa, affected by higher fuel and food prices.
“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.
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.
“This happens when the export tonnages of all other essential oils are under pressure: soybean oil due to droughts in South America; rapeseed oil due to disastrous rapeseed harvests in Canada; and sunflower oil because of Russia’s war against Ukraine, “Fry said.
Rashid Jan Mohd, chairman of the Pakistani Edible Oil Refineries Association (PEORA), said: “No one can compensate for the loss of Indonesian palm oil. Every country will suffer. “
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. .
Buyers had hoped that the sunflower harvest from Ukraine’s largest exporter would ease tensions, but supplies from Kyiv halted as a result of the Russian invasion.
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).
People queue to buy oil in Palembang, Indonesia Photo: Abdul Qodir / AFP / Getty Images
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. Malaysia accounts for 31% of world palm oil supplies, second only to 56% in Indonesia.
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.
In February, vegetable oil prices jumped to record highs as sunflower oil supplies were cut off by the Black Sea region.
A state-backed Malaysian palm oil group has said countries should stop or delay the use of edible oil as a biofuel to ensure adequate food supplies, warning of a supply crisis following Indonesia’s ban on palm oil exports.
Palm oil is also used as a raw material for biodiesel. Indonesia and Malaysia have made it mandatory to blend biodiesel with a certain amount of palm oil – 30% and 20% respectively – and only last month said they remained committed to these mandates, despite higher palm prices.
With Reuters
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