In what could have a devastating impact on edible oil prices and supplies in India, Indonesia, which is the world’s largest producer of palm oil and accounts for almost 45 percent of the total palm oil supplied to India annually, decided to ban exports from April 28 until further notice.
According to media reports, exports have been stopped to control the increase in domestic palm oil prices, which has created a scenario of unrest in the country.
India imports about 13-13.5 million tons of edible oils each year, of which about 8-8.5 million tons (about 63 percent) is palm oil.
Of these, 8-8.5 million tons of palm oil, almost 45 percent comes from Indonesia and the rest from neighboring Malaysia.
Trading sources said that if monthly supplies of around 300,000-325,000 tons of palm oil are suddenly stopped from May, it will cause a sharp escalation in edible oil prices that have already been boiling due to the current crisis. between Russia and Ukraine.
“Since the crisis between Russia and Ukraine, supplies of sunflower oil from India have decreased from 200,000 to 250,000 per month to less than 100,000 tons per month, causing a sharp increase in prices. On top of this, if Indonesia now decides to suspend palm oil exports, it will cause serious problems for us,” warned BV Mehta, Director General of the Indian Solvent Extractors Association (SEA).
Mehta said that India should immediately activate its diplomatic channels to prevent this catastrophe.
The landed price of crude palm oil in Mumbai through April 14 is already 51 percent higher than the same period a year earlier, according to the latest trade data.
“The ban will not only affect us, but also every other country in the world that depends on Indonesia for palm oil,” Mehta said.
The world consumes around 240 million tons of edible oils annually, of which nearly 80 million tons (34 percent) is palm oil.
Of this, almost 50 million tons come from Indonesia.
According to trade sources, Indonesia’s domestic consumption of palm oil is around 20 million tons, leaving the rest for exports.
Meanwhile, the Reuters news agency said that Indonesian President Joko Widodo announced on Friday the suspension of shipments of cooking oil and its raw material to control the increase in domestic prices from April 28.
In a video broadcast, Jokowi, as the president is popularly known, said the policy is aimed at ensuring the availability of food products at home.
“I will monitor and evaluate the implementation of this policy so that the availability of cooking oil in the domestic market is abundant and affordable,” he said.
US soybean oil futures rose more than 3% to a record high of 84.03 cents per pound after Indonesia announced the ban.
“The sky would be the limit for edible oil prices now. Buyers relied on palm oil after solar oil supplies fell due to the Ukraine war,” said a Mumbai-based trader at a trading firm. global.
Indonesia has since 2018 halted the issuance of new permits for palm oil plantations, often blamed for deforestation and the destruction of habitats for endangered animals such as orangutans.
The palm oil industry association GAPKI said it would meet on the president’s announcement.
“As citizens, we abide by the president’s decision,” a GAPKI spokesperson said in a text message.
In Indonesia, the retail price of cooking oil averages Rs 26,436 ($1.84) per liter, an increase of more than 40% year-to-date. In some provinces of the country, prices have almost doubled in the last month alone, according to a price tracking page.
Student demonstrations have been held in several Indonesian cities in recent days over high prices for cooking oil.