Indonesia, the world’s biggest edible oils shipper, will widen an export ban to include crude palm oil, adding to uncertainty in a market that’s suffered dizzying price swings and threatening to worsen global food inflation.
The ban will be expanded to crude palm oil, RBD palm oil and used cooking oil, Coordinating Minister for Economic Affairs Airlangga Hartarto said at a briefing Wednesday. A day earlier, he said the halt would only apply to palm olein. The policy will start on April 28 and last until domestic cooking oil prices ease.
Indonesia’s export policy has sent the palm oil industry into a tailspin. Prices have been whipsawed, rising one moment as the lack of details from the initial statement had traders fearing that the ban would cover all products, then slumping the next as details emerged that the move would be restricted to certain refined goods. Futures rallied 10% just before the latest announcement.
It is another example of a policy flip-flop that has raised concerns about Indonesia’s business image. The country is a major commodities supplier and had imposed restrictions on nickel and coal exports in the past. Speculation about what Indonesia may do next keeps the industry constantly on its toes.
Palm oil is processed and shipped in different forms. The fleshy, red fruits of the oil palm tree are crushed to produce crude palm oil. The product can be refined, bleached and deodorized to remove impurities. With further processing, palm olein is produced, which is the most widely used cooking oil in the world. The non-edible oils are used to make biodiesel and soap.
The move by Indonesia, which accounts for a third of global edible oil exports, adds to a raft of crop protectionism around the world since the war in Ukraine erupted, as governments seek to protect their own food supply with agriculture prices surging. The ban threatens to further fan food inflation, which has been surging at a rampant pace, and raises the risk of a full-blown hunger crisis.
“Now we will enter the new bullish era where edible oil shortages will increase globally,” said Abdul Hameed, director of sales at Manzoor Trading in Pakistan. “Many countries will have to rely on their own crops and use domestic resources. There could be more crop protectionism happening.”Local shortages of edible oils has roiled Indonesia, leading to street protests over high food prices and the detention of a trade official in a corruption case. The turbulence has become a key political issue for President Joko Widodo as cooking oil costs could push other food prices higher ahead of the Eid al-Fitr holiday, which is usually marked with feasts and celebration.
“Once the local need is fulfilled, surely I will revoke this export ban because I understand how the government needs taxes, needs overseas earnings, and needs a trade surplus,” said the president, known as Jokowi. “The people’s need is a more important priority.”