Indonesia surprises markets by expanding ban to include CPO, refined palm oil

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

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  • Exports of crude palm oil and refined palm oil also prohibited
  • Industry participants ‘in shock’ at latest development
  • Ships deployed to enforce export ban
  • Government under pressure to stop cooking oil price rise

JAKARTA, April 27 (Reuters) – Indonesia widened the scope of its export ban on raw materials for cooking oil to include crude and refined palm oil, its economy minister said on Wednesday, leaving markets shocked by the latest change. Politics.

The announcement reversed the minister’s statement a day earlier, in which he had said the export ban would only cover refined, bleached and deodorized palm olein.

The change was “in line with the president’s decision and after taking into account people’s comments and views,” Airlangga Hartarto said in a brief statement.

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President Joko Widodo said in a separate statement that people’s need for affordable food outweighed concerns about income for now.

“Once the domestic needs have been met, of course I will lift the export ban because I know the country needs taxes, … foreign exchange, … a balance of trade surplus, but meeting the basic needs of the people it’s a higher priority.” he said.

Jokowi, as the president is popularly known, said Indonesia had enough capacity to meet domestic demand and that it was “ironic” that the country was facing a shortage of cooking oil.

Palm oil markets have been skittish before the ban and Indonesia has deployed navy ships and personnel in an effort to thwart illegal shipments.

The new rules were to take effect at midnight local time (1700 GMT), and the navy and other agencies have been instructed to step up patrols in Indonesian waters to ensure compliance, navy spokesman Julius Widjojono said. .

Palm oil futures on the Malaysian exchange rose 9.8% on Wednesday as some market participants feared that exporters from Indonesia, the world’s largest palm oil producer, would not be able to ship their products on time. before the ban begins.

US soybean oil futures rose more than 4% to a record high after Indonesia expanded the ban to include crude palm oil.

It was unclear whether the palm oil companies had been informed of the latest policy change.

Industry and trade sources, who requested anonymity due to the sensitivity of the issue, said they were shocked by the latest development.

“It is a drastic measure to control prices and we hope it will have the desired effect in a short period and avoid damaging the industry,” said a palm industry source.

“This is crazy. We are paying a price for Indonesia’s policy changes. Every vegetable oil is through the roof. Securing the supply of any vegetable oil for May shipments is a challenge,” said an Indonesia-based trader. New Delhi with a trading company

A Commerce Ministry regulation issued on Wednesday said exporters who have obtained the customs declaration by April 27 are still allowed to ship their products.

The export ban will be reviewed monthly or as often as necessary, the regulation added.

Eddy Martono, secretary general of the Indonesian Palm Oil Association (GAPKI), said on Wednesday that the industry was trying to “operate as usual while continuing to monitor market movements”.

Eddy said that with such short notice about the ban, first announced by President Joko Widodo on Friday night, there was no way exporters could get their products out.

“It is impossible to get a ship instantly, everything would have been chartered,” he said.

Indonesia’s restrictions have pushed up global edible oil prices as supplies were already choked by factors including drought and shortages after Russia’s invasion of top crop producer Ukraine.

Indonesia’s ban on palm oil exports is unlikely to last more than a month due to limited infrastructure to store surplus oil and due to growing pressure from buyers to resume shipments, industry officials said. . read more

The ban would remain in place until bulk cooking oil prices fell to 14,000 rupees ($0.9720) per litre, Airlangga said. read more

In Jakarta, bulk cooking oil prices were offered at around 19,000-20,000 rupees ($1.32-1.39) on Wednesday and in other regions prices could be higher, said Reynaldi Sarijowan, a senior official. of the traditional market merchants association.

In Riau province on the island of Sumatra, small farmers have already seen a drastic drop in the price of palm oil fruits due to the export ban, local planters said, and they fear palm oil companies stop buying from independent farmers.

($1 = 14,404,000 rupees)

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Information from Bernadette Christina Munthe and Fransiska Nangoy; Additional reporting by Gayatri Suroyo and Stefanno Sulaiman in Jakarta, Rajendra Jadhav in Mumbai Editing by Ed Davies, Martin Petty, Kanupriya Kapoor

Our standards: the Thomson Reuters Trust Principles.

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