Indonesia’s decision to ban export of palm oil may worsen the global food inflation and also aggravate volatility in crop markets that are reeling under effects of the months-long Ukraine war, according to reports.
Last Friday, the Indonesian government, in a surprise announcement, said that from April 28, it will ban export of palm oil, adding the move will last until the government deems a domestic shortage resolved.
Indonesia is currently the world’s biggest palm oil producer and accounts for a third of global edible oil exports.
Palm oil is used in a majority of consumer products ranging from chocolates, cakes, soap, shampoos and cleaning products. Some of the world’s biggest fast-moving consumer goods (FMCGs) companies, including Nestle and Unilever, use it in huge quantities.
Speaking to news agency Bloomberg on Monday, Avtar Sandu, senior manager of commodities at Phillip Nova, said, “The halting of shipments of the cooking oil and its raw material, widely used in products ranging from cakes to cosmetics, could raise costs for packaged food producers globally.”
Sandu said Indonesia’s decision has also left many questions unanswered as it comes at a time when edible oils like sunflower oil supplies are facing issues due to violence in the Black Sea region.
The Black Sea accounts for 76 per cent of world sun oil exports. However, commercial shipping from the region has been impacted since the beginning of the war in Ukraine in February.
Indonesia’s finance minister Sri Mulyani Indrawati said her government’s ban on palm oil exports will hurt other countries, while adding it is necessary to bring down the soaring domestic price of cooking oil.
“We know that this is not going to be the best result,” Indrawati, a former World Bank managing director, told news agency Reuters last week. “If we are not going to export, that’s definitely going to hit the other countries,” she added.
Given the local shortages of edible oils in Indonesia, the country has witnessed street protests over high food prices.
The export ban announcement comes just days before the industry ministry said distribution of its domestic cooking oils has met the national demand. Managing food prices becomes an important priority for the government as Indonesia will head to the Eid al-Fitr holiday, which is marked with feasts and celebrations.
(With inputs from Bloomberg, Reuters)