Global edible oil consumers have no option but to pay top dollar for supplies after Indonesia’s surprise palm oil export ban forced buyers to seek alternatives, already in short supply due to adverse weather and Russia’s invasion of Ukraine.
The move by the world’s biggest palm oil producer to ban exports from Thursday will lift prices of all major edible oils including palm oil, soyoil, sunflower oil and rapeseed oil, industry watchers predict. That will place extra strain on cost-sensitive consumers in Asia and Africa hit by higher fuel and food prices.
“Indonesia’s decision affects not only palm oil availability, but vegetable oils worldwide,” LMC International Chairman of Commodities Consultancy James Fry told Reuters.
Palm oil – used in everything from cakes and frying fats to cosmetics and cleaning products – accounts for nearly 60% of global vegetable oil shipments, and top producer Indonesia accounts for around a third of all vegetable oil exports. It announced the export ban on April 22, until further notice, in a move to tackle rising domestic prices.
“This is happening when the export tonnages of all other major oils are under pressure: soybean oil due to droughts in South America, rapeseed oil due to disastrous canola crops in Canada, and sunflower oil because of Russia’s war on Ukraine,” Fry said.
Vegetable oil prices have already risen more than 50% in the past six months as factors from labour shortages in Malaysia to droughts in Argentina and Canada – the biggest exporters of soyoil and canola oil respectively – curtailed supplies. Buyers were hoping a bumper sunflower crop from top exporter Ukraine would ease the tightness, but supplies from Kyiv have stopped because of what Russia calls its “special operation” in the country.
Published in The Express Tribune, April 26th, 2022.
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