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Indonesia to ban palm oil exports to shore-up supply, soyoil futures surge

FILE PHOTO: People shop for cooking oil made from oil palms at a supermarket in Jakarta, Indonesia, March 27, 2022. REUTERS/Willy Kurniawan

By Fransiska Nangoy

JAKARTA (Reuters) – Indonesia will effectively ban palm oil exports from April 28, until further notice, after President Joko Widodo announced on Friday a halting of shipments of cooking oil and its raw material to control soaring domestic prices.

A previous move by Indonesia to restrict palm oil exports, introduced in late January and later lifted in March, sent global prices of the commodity to historic highs.

Its cooking oil derives mainly from palm oil, of which Indonesia is the world’s biggest producer and exporter, and its measures to guarantee domestic supplies have rattled global markets.

In a short video broadcast, Jokowi, as the president is popularly known, said the policy aimed to ensure availability of food products at home.

“I will monitor and evaluate the implementation of this policy so availability of cooking oil in the domestic market becomes abundant and affordable,” he said.

U.S. soyoil futures jumped more than 3% to hit a record high of 84.03 cents per pound after Indonesia announced the ban.

The move will hurt consumers not only in biggest buyer India but globally, as palm is the world’s most consumed oil, Atul Chaturvedi, president of trade body the Solvent Extractors Association of India (SEA), told Reuters.

“This move is rather unfortunate and totally unexpected,” he said.

“Sky would be limit for edible oil prices now. Buyers were banking on palm oil after sunoil supplies fell because of the Ukraine war,” a Mumbai-based dealer at a global trading firm said.

“Now they (buyers) don’ have any option as soyoil supplies are also limited.”

Officials at Indonesia’s palm oil association GAPKI did not immediately respond to requests for comment.

At home, retail prices of cooking oil were mostly sold at above 20,000 rupiah per litre. In some provinces across the Indonesia, cooking oil prices have nearly doubled in the past month alone, according to a price monitoring page.

Demonstrations by students have taken place in several cities across Indonesia in recent days over high cooking oil prices.

Indonesia’s government has set a cap of 14,000 rupiah per litre for bulk cooking oil, but officials have said many retailers were still selling them over the limit.

A state probe is underway into alleged corruption in the issue of sought-after export permits. The Attorney General’s Office last week named a senior trade ministry official and three palm oil executives as suspects.

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