Indonesia bans palm oil exports, poor people in many countries suffer from lack of cheap cooking oil

Harvesting oil palm fruit in Indonesia’s Riau province – Photo: REUTERS

In a statement late on April 27, the Indonesian Government confirmed that the export ban would apply to all oilseeds, not just oilseeds. palm oil and other edible vegetable oils as announced a day before.

Indonesia’s Coordinating Minister of Economic Affairs Airlangga Hartarto emphasized that all products, including crude palm oil, are banned from export. The Indonesian military has previously confirmed that it will send warships to patrol and prevent the flow of palm oil to foreign ships.

Palm oil prices have continuously climbed to new highs as shippers worry that the amount of palm oil they have paid for will not be transferred to ships before Indonesia’s ban takes effect from April 28.

Why ban?

President Joko Widodo said providing cooking oil to Indonesia’s 270 million residents was his government’s “highest priority”. The Indonesian leader called his people’s lack of cooking oil “ironically” when this is the world’s No. 1 palm oil exporter.

Indonesia produces about 60% of the world’s palm oil, of which about a third is consumed by the domestic market. India, China, the European Union and Pakistan are among the main export markets.

In addition to traditional culinary reasons, palm oil is also favored by many low-income countries because of its low price. This used to be the cheapest vegetable oil in the world and is one of the four main cooking oils in India, where prices for these items are considered the world benchmark.

The shortage of cooking oil in the country as well as the skyrocketing prices after COVID-19 bring many potential risks of instability in Indonesia. People in some cities have now had to queue for hours in front of distribution centers to buy essential items subsidized by the state.

Indonesia, Southeast Asia’s top economy and also the region’s most populous country, is concerned that shortages of basic necessities and rising living costs could cause social tension.

Public discontent over rising food prices has driven down President Widodo’s approval ratings and led to protests in several cities, according to recent polls.

Faced with this risk, Jakarta was forced to ban the export of all oilseeds to stabilize the domestic situation. Indonesia plans to resume exports when the price of cooking oil in the domestic market drops to 14,000 rupiah/liter ($0.97/liter) instead of 26,000 rupiah/liter ($1.8/liter) as in recent days. .

A street cart using palm oil in Ivory Coast – Photo: REUTERS

Worried poor people

Indonesia’s ban on palm oil exports is expected to push up prices for this commodity and essentials. Prices of cooking oil and food had previously increased because of concerns surrounding the war in Ukraine, according to Reuters news agency.

Even before fighting broke out in Ukraine, inflation pushed food prices up more than 23% last year, the fastest pace in more than a decade, according to the United Nations Food and Agriculture Organization (FAO).

Production of soybean oil from Argentina and canola oil from Canada has decreased due to severe weather and unstable supply from Indonesia due to COVID-19 making sunflower oil the hope of many countries.

However, after Russia sent troops into Ukraine, which accounts for about 60% of the world’s sunflower oil, this hope was dashed. With Indonesia’s total ban on palm oil exports, world cooking oil prices are forecast to rise further.

“The poorest people in the big countries or countries in Africa will certainly bear the brunt of this cost,” James Fry, founder of agricultural commodities consultancy LMC International, told Reuters.

Nearly two dozen African countries grow oil palm on about 6 million hectares of land, but the output is not enough to meet the needs of the continent.