Indonesia may Revoke Ban on Palm Oil Exports by Month-End

Indonesia will likely be forced to lift its ban on palm oil exports—both crude (CPO) and refined, bleached deodorised (RBD)—by the end of this month as its policy has resulted in total chaos in the local edible oil industry.

Besides, the Joko Widodo government has been unable to achieve its target of bringing down the packaged edible oil price to 14,000 Indonesian rupiah (₹74.50 approximately) a litre. Indonesia’s ban, which came into force on April 28, has also upset some of the importing nations such as India and Pakistan with the former raising the issue at the World Trade Organisation (WTO) last week.

Domestic prices above target

The Indonesian government, in its order issued on April 28, said cooking oil prices would have to drop to 14,000 rupiah before the ban on crude palm oil and RBD palm oil could be revoked.

This has resulted in many edible oil-producing companies stopping the procurement of oil palm fresh fruit bunches (FFB) from growers. In turn, farmers have stopped harvesting FFB, hoping the Widodo government will revoke the ban. “There is a near panic situation there. Crude palm oil is overflowing in the storage tanks due to the ban. The factories that crush FFB to produce crude palm oil have slowed down production and no longer accept FFB,” Hameed said.

Malaysian Cuts Export Tax by 50%

Also, with Malaysia last week announcing a 50 per cent cut in the export tax there is a real threat of Indonesia losing out on its export markets. “India and Pakistani will take advantage of the cut in Malaysian export tax and Malaysian palm oil share will rise in both markets,” he said.

Reports said India and other importing nations are turning towards Malaysia in view of the Indonesian ban. The export tax has further boosted Malaysian export prospects.

Though crude palm oil price on Bursa Malaysia Derivatives Exchange increased immediately on Kuala Lumpur’s tax cut plans, it has begun to stabilise, analysts said. On Thursday, July crude palm oil contracts dropped by 148 Malaysian ringgits to 6,311 ringgits ($1,436.80) a tonne.

The Indonesia ban on palm oil and supply shortage in sunflower oil has resulted in soyabean oil gaining. But the Covid pandemic leading to lower imports by China is holding the market on a leash.