Indonesia lifts sanctions
Top supplier Indonesia lifts ban on palm oil exports after nearly three weeks The ban, which took effect on April 26, will be lifted next Monday (May 23). Indonesia's announcement is a sign of relief in the international edible oil market. Bangladeshis can also be optimistic. Because Bangladesh imports about 80 percent of its edible oil from Indonesia.
The government of President Joko Widodo has made several changes to its palm oil policy in the Southeast Asian country since November last year. They banned the export of palm oil in late April due to the rise in edible oil prices in the local market. As a result of the shortage in the global edible oil market, local palm farmers became angry. The Russia-Ukraine war has led to a shortage of edible oil in the world, with prices rising sharply due to Indonesia's unexpected sanctions.
From cooking to soap-shampoo or car fuel, where there is no use of palm oil. Indonesia alone supplies about 70 percent of global demand. Then there is neighboring Malaysia.
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President Joko Widodo is known as a popular leader in Indonesia. However, since the ban on palm oil exports, its popularity has plummeted. Meanwhile, Widodo's public support has fallen to its lowest level in six years. The country's palm farmers have taken to the streets to demand the lifting of the ban. Widodo announced the lifting of the ban on palm oil exports last Thursday (May 19) in the face of mounting pressure from within and outside the country.
However, the country's target of reducing edible oil prices in the local market has not yet been met. On Friday, Indonesian Economy Minister Airlanga Hartarto said the government would impose a domestic market obligation (DMO) on palm oil to ensure the country has a stockpile of 10 million tonnes of edible oil. He said the Ministry of Commerce would determine the size of the DMO, which each manufacturer must meet.
The Indonesian government set a DMO of 20 percent of the companies' planned export targets in January. In March, it was increased to 30 percent. However, it was later canceled due to high export tariffs.
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Signs of relief in the oil market
Indonesia's economy minister said the country's monthly edible oil reserves had risen from 33 percent in March to 109 percent due to sanctions, in response to demand. Besides, the price of edible oil per liter has come down from Rs 19,600 (Rs 116.19) to Rs 16,000 (Rs 101.46).
Wong Chi Ting, an analyst at Malaysia's Maybank, said crude palm oil (CPO) prices were expected to fall in international markets following Indonesia's decision to lift sanctions. According to him, the availability of Indonesian palm oil will affect the price of CPO in the international market.
Moreover, lifting the export ban is quite a relief for Indonesian farmers. Hundreds of palm farmers have protested in Jakarta this week against a ban on palm oil exports.
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Gulat Manurang, chairman of Indonesia's small farmers' organization Apakasindor, said in a statement that the price of palm fruit had dropped by about 60 percent since the export ban. He welcomed the decision to lift the ban. According to Gulat, the ban demonstrates the importance of palm oil for Indonesia.
Traders have also been relieved by the announcement of lifting the ban. The Indonesian Palm Oil Association hopes that there will be no problem in meeting the DMO if the country has sufficient production of palm oil.
Benchmark palm oil prices in Malaysia fell nearly two per cent on Thursday after the Indonesian government announced the lifting of export bans. The Indonesian rupiah gained 0.46 percent and the Jakarta stock index rose 1.65 percent.
