Palm oil edible oil products are displayed in a large supermarket in Indonesia. | Reuters Yonhap News
As Indonesia, the world’s largest palm oil producer, suspends palm oil exports, concerns are growing that the price of cooking oil and food products will soar around the world. However, there is a forecast that the worst edible oil crisis will be avoided as the export ban is limited to some items.
Indonesia has recently decided to ban palm oil exports due to a lack of domestic supplies. Indonesian President Joko Widodo announced on the 22nd (local time) that “from the 28th, the export of cooking oil and raw materials for cooking oil will be banned until further notice.” As most of the palm oil produced in their country was exported for export, the ‘edible oil crisis’ began to break out. As the international palm oil price, which rose last year, rose further due to the Ukraine crisis this year, Indonesian palm oil producers concentrated on exports rather than domestic consumption, causing domestic edible milk prices to rise.
Industry insiders predicted that the price of major edible oils around the world, such as palm oil, soybean oil, and sunflower seed oil, would rise as a result of this measure. James Fry, president of consulting firm LMC International, told Reuters that Indonesia’s decision will affect not only palm oil but also global vegetable oil supply. As major edible oil exporting countries such as Brazil, Argentina and Canada are unable to supply large quantities of alternatives to palm oil, Indonesia’s decision will have a greater impact on the world. Argentina and Canada, the largest exporters of soybean oil and canola oil, respectively, have suffered production losses since last year due to drought. Ukraine, which accounts for about half of the world’s sunflower seed oil production, is also known to have stopped supplying sunflower seed oil due to an all-out Russian invasion. Malaysia, the world’s second-largest producer of palm oil, is unable to increase palm oil production in a short period of time due to a labor shortage.
Some are concerned that Indonesia’s decision will reinforce the ‘food protectionism’ that has spread around the world since the Ukraine war, leading to a hunger crisis. According to Bloomberg News, the United States and other rich countries will suffer inflation to the extent that salad dressings and mayonnaise prices rise as a result of this measure, but the damage to developing countries such as India will be much greater. It is said that the impact is inevitably large as it is highly dependent on palm oil, which is an alternative to expensive soybean oil, sunflower oil, and canola oil.
On the other hand, there is also a prospect that the international community can avoid the worst damage since Indonesia has limited export bans. According to Reuters, Indonesia’s Ministry of Agriculture and Forestry only announced the ban on export of ‘RBD palm olein’, a raw material for cooking oil, in a letter to local government leaders on the 25th. RBD palm olein accounts for 30-40% of Indonesia’s total palm oil exports. According to Bloomberg News, citing a source, Indonesia’s export ban only applies to RBD palm olein, while other products, such as palm oil crude oil and RBD palm oil, can continue to be exported.
