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Southeast Asia

Indonesia to resume palm oil exports

Published : May 21, 2022 15:35 IST T+T-
Farming groups have previously expressed anger at the palm oil export ban.

Farming groups have previously expressed anger at the palm oil export ban.

Prices previously rose 200 per cent on international markets after Indonesia had banned exports.

Indonesia has reversed a ban on exports of palm oil, bringing relief to international buyers and Indonesian farmers after protests against the export ban took place earlier this week. The government will ask producers to reserve some of their production for the domestic market due to the price of palm oil in Indonesian shops remaining above the government target of 14,000 rupiah ($.096, €0.90) per litre.

Why did Indonesia ban exports of palm oil?

Price volatility for Indonesian consumers has been a concern of President Joko Widodo since late November, with gradually increasing restrictions on exports brought in up until the export ban was declared in April. Back then, Widodo had promised to monitor prices, after large demonstrations in the capital Jakarta over high food prices took place. Jokowi, as the president is known, said on May 20 that he expects prices for domestic consumers to reduce further even as exports resume, and that the government would monitor prices and act to keep more palm oil in the country if necessary.

Farmer protests

Farming groups had demonstrated earlier this week against the export ban, which had hit their incomes at a time of rising global prices. "Based on the current supply and price of cooking oil and considering that there are 17 million workers in the palm oil industry, both working farmers and other supporting staff, I have decided that the export of cooking oil will reopen on Monday, May 23," AP news agency reported Widodo as saying.

Economy Minister Airlangga Hartarto said the government will impose a Domestic Market Obligation (DMO) on palm oil producers to ensure 10 million tons of cooking oil remains at home. "The trade ministry will determine the size of the DMO that must be met by each producer and the mechanism to produce and distribute cooking oil to the communities," the coordinating minister for economic affairs told a virtual briefing, according to Reuters .

Why is palm oil so important?

April's decision to ban exports had spooked global markets, which rely on Indonesia to meet 60 per cent of global demand. The product is crucial for production of everything from food products to shampoo to biodiesel. When Widodo's government banned exports, prices leapt by more than 200 per cent on the global market.

Cooking oil prices were already high following Russia's attack on Ukraine — the two countries responsible for more than half of global production of sunflower oil, according to the UN's Food and Agriculture Organization (FAO). That caused a jump in prices of all cooking oils, including palm oil. Supplies for Indonesian consumers reduced, with just 33 per cent of Indonesian demand being met in March and prices rising as a consequence. Airlangga said that supply was now much improved, with 109 per cent of demand now available on the domestic market.

er/kb (AP, Reuters)