Already disrupted by the war in Ukraine, the vegetable oil market is facing a new pitfall: Indonesia has decided to suspend all its palm oil exports. This measure began to take effect this Thursday, April 28, knowing that the archipelago is the world’s leading producer.
Indonesia has been facing a shortage and soaring prices of palm oil-based cooking oil in its domestic market for several months. Fear of rising social tensions led the country to suspend exports.
Public dissatisfaction with rising food prices has sparked protests in several cities and, according to recent polls, contributed to a decline in the popularity of President Joko Widodo.
“As the biggest producer of palm oil, it is ironic that we have difficulty obtaining cooking oil,” he said. The country is actually faced with problems of distribution and retention of stocks, in particular because producers prefer to sell their cargoes internationally, to take full advantage of the rise in prices.
Result: since the beginning of the year, the most modest consumers have often had to wait for hours in long queues in front of the distribution centers of oil at subsidized prices, in many cities.
On Tuesday, the authorities had initially announced that the suspension would only concern products intended for edible oils. But, the next day, the measure was finally extended to all oilseed exports.
“All products”, including crude palm oil “are covered by a decree from the Ministry of Commerce”, indicated Airlangga Hartarto, Coordinating Minister for the Economy. Before the entry into force of the embargo, Wednesday at midnight, the price of crude palm oil jumped by nearly 10% on the Kuala Lumpur Stock Exchange, a jump of 63% over one year.
Penalties to pay
Joko Widodo said that supplying the population was now “the highest priority”. According to him, exports will be able to resume when the wholesale price of cooking oil drops to 14,000 rupees (97 cents) in the archipelago, after having soared by 70% in recent weeks.
According to Bhima Yudistira, economist at the Center for Economic and Legal Studies (Celios), “India, China, Bangladesh and Pakistan” are “the most affected” by the suspension of Indonesian exports, especially for their food consumption. .
Indonesia accounts for some 60% of palm oil production, a third of which is consumed on its domestic market. Last year, the archipelago exported 34.2 million tonnes, for oil and food but also for the manufacture of a wide range of products, from cosmetics to food products.
With the suspension of all its exports, Indonesia risks having to pay penalties for breach of contracts. It is also likely to be sued before the World Trade Organization (WTO) if this ban is prolonged.
