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Indonesia’s ban on palm oil exports shocks global edible oil market

Indonesia’s ban on palm oil exports shocks global edible oil market

The government of Indonesia has reportedly banned the export of palm oil, delivering a severe shock to the global edible oil market, which had recently hit record high prices this year, raising concerns among key importers of the renowned cooking oil.

For the uninitiated, palm oil is the most frequently used vegetable oil globally, and it is used to make a variety of items such as biscuits, laundry detergents, margarine, and chocolate.

The US Department of Agriculture (USDA) estimates that 77 million tonnes of palm oil will be made this year. Indonesia is the world's largest exporter, producer, and user of palm oil, amounting to over 60% of global production. Malaysia is the second-biggest producer, accounting for over 25% of global supply.

The production of palm oil had already dropped in 2020 and 2021, owing to a unavailability of migrant labor across Southeast Asian plantations, which resulted in low fruit bunch harvesting and lower fertilizer treatments for trees.

Exports of edible oil was formerly prohibited by Indonesian authorities between January end and mid-March to effectively keep domestic cooking oil costs under control.

However, concerns about Indonesia's plan to explicitly ban palm oil exports has driven prices up to new highs.

As per reports, India is the world’s top importer of palm oil, with Pakistan, China, Egypt Bangladesh, and Kenya following close behind.

As per the USDA, in an average year, palm oil supposedly accounts for more than 40% India's vegetable oil-based food consumption. However, the country’s import forecasts have dropped this year citing the restrictive trade policies of Indonesia, high prices of edible oil, and other factors.

Prices of vegetable oil have already jumped up more than 50% over the last six months, with factors ranging from Malaysia’s labour shortages to Argentina and Canada’s curtailing supplies. For the record, Canada and Argentina are the world’s biggest exporters of canola and soy oil respectively.

This year, buyers were hoping that a bumper sunflower crop harvest from Ukraine, the world’s top exporter, would ease the supposed tightness. However, supplies from Kyiv have virtually stopped following Russia’s invasion of the country.

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Omkar Patwardhan

Omkar Patwardhan started his professional career in the hospitality industry. Having nurtured a deep-sated passion for words however, he found his way into content writing and now pens down articles for numerous websites, including News Origins, spanning the sectors of business, finance, and technology.