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Southeast Asia

Indonesia bans palm oil exports

Published : Apr 23, 2022 12:54 IST T+T-
Indonesia accounts for more than half of the world's palm oil exports.

Indonesia accounts for more than half of the world's palm oil exports.

The ban from the world's largest exporter has rocked an already precarious edible oil market.

Indonesia announced on April 22 a ban on palm oil exports in a bid to stymie the soaring domestic price of cooking oil. Palm oil is the most produced, consumed and traded edible oil in the world. The price of cooking oil has risen substantially as a result of Russia's invasion of Ukraine. Both Ukraine and Russia are major exporters of sunflower oil.

What did Indonesian authorities say about the ban?

"I will continue to monitor and evaluate the implementation of this policy so that the availability of cooking oil in the country is abundant and at an affordable price," Indonesian President Joko Widodo said in a statement. The announcement followed a rally in Jakarta, where hundreds protested soaring oil and food prices.

Indonesian Finance Minister Sri Mulyani Indrawati told Reuters that Jakarta understood that the ban would hurt other countries, but stressed that it was necessary to bring down the domestic price of cooking oil as demand exceeds supplies. Indrawati said that the government made what amounted to one of the "harshest moves" possible after previous measures failed to stabilize prices.

Indonesia's government had previously required producers to reserve stocks for domestic use, but this did not succeed in bringing prices down to an affordable level for the country's households. "It's still too expensive for the ordinary household to buy these cooking oils," Indonesia's finance minister said. "We know that this is not going to be the best result," Indrawati said. "If we are not going to export, that's definitely going to hit the other countries."

Why are Indonesian palm oil exports important?

China and India are big importers of Indonesian palm oil. Indonesia is the largest producer of the oil and accounts for more than half of the world's supply. Neighbouring Malaysia is the world's second-largest producer. Palm oil is used in cooking oils, processed foods, cleaning products, cosmetics, biofuels and other products.

At this week's International Monetary Fund (IMF) and World Bank meetings in Washington, policymakers expressed concern about possible food shortages due to the war in Ukraine. World Bank president David Malpass urged countries to avoid hoarding food stocks or implementing export controls.

Around 77 million metric tons of palm oil are expected to be produced this year, according to the U.S. Department of Agriculture. Global palm oil production already slumped during the first two years of the COVID-19 pandemic due to a drop in migrant labour on plantations in Southeast Asia. Other edible oils have also seen reduced exports. Major soybean oil producer Argentina is expected to ship less oil this year following a poor end to its soybean growing season, and in 2021 drought devastated Canada's canola harvest.

sdi/msh (AP, Reuters)

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