Indonesia's move to ban exports of palm oil has pushed palm oil rates by 8-9 percent and food-and consumer-goods (FMCG) stocks have come under pressure. As a result, stocks such as HUL, Britannia, Marico, Godrej Consumer witnessed selling pressure today because of higher input costs.
Mayank Shah, Senior Category Head at Parle Products, said that the ban on palm oil export by Indonesia would have an impact on costs.
''Even before Indonesia announced the ban, oil prices were at record highs. The ban is only going to add to our challenges and the food as well as non-food players of the industry will face a critical challenge going forward,'' said Shah in an exclusive interview with CNBC TV-18.
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For India, Indonesia is the source of 50 percent of its crude palm oil exports. The ban is likely to push crude palm oil prices through the roof, which were already sitting near multi-year highs after Russia's invasion of Ukraine forced nations to shift to palm oil to substitute for the sunflower oil loss.
Analysts believe that the ban is a temporary measure of two-three weeks as Indonesia will lose out on exports. Shah of Parle also believes that the ban will not be sustainable for a long time.
''Indonesia banned the export of palm oil to prevent domestic shortfall and to take care of the local unrest in the country due to increasing edible oil prices,'' said Shah.
''It is a measure to pacify the local public as there were widespread protests against the government in Indonesia on increasing edible oil rates, that too when it happens to be a major exporter of palm oil,'' he added.
Additionally, palm oil inventory is not more than a few days and crude palm oil has a limited shelf life. ''Most of the firms hedge 40-50 percent of palm oil exposure,'' he added.
Most companies use forward contracts to hedge their risks. It is used more as a hedging tool and not as a speculating tool, according to Shah.
