JAKARTA, INDONESIA — Indonesia President Joko Widodo announced April 22 he would ban exports of palm oil beginning April 28 in an effort to reduce his country’s soaring food costs. No timeline for the conclusion of the ban was given at the announcement. On April 25 the Indonesian government clarified that the ban pertained only to exports of refined, bleached, deodorized (RBD) palm oil; crude palm oil was still available for shipment at this time.
Indonesia is the world’s leading producer of palm oil. In 2021, Indonesia exported a monthly average of 620,000 tonnes of RBD and 100,000 tonnes of crude palm oil. The main importing countries were India, Pakistan and Spain.
The April 22 announcement sent Chicago soybean oil futures soaring to an all-time high of 84.85¢ per pound before settling at 83.26¢ per pound. Malaysian crude palm oil futures jumped 7%. After the RBD clarification, the Chicago May future pulled back but remained firm at 82.74¢ per pound, and Malaysian crude palm futures pared 3% off its gains.
Since March 2020, nearby Chicago spot soybean oil futures have rallied 244% on tight global supplies. Palm oil production in Malaysia and Indonesia slowed sharply after their labor force was impacted by COVID. Severe drought in 2022 leading to reduced soybean crops in South America along with Russia’s invasion of Ukraine, the world’s leading supplier of sunflower seed oil, further intensified the world’s limited access to vegetable oils.
In January Indonesia restricted palm oil exports by expanding its domestic food market mandate. These restrictions were lifted in March. Analysts wonder how long this current ban will stay in effect as palm oil production in Indonesia is seasonally strong and storing palm oil for extended periods is not viable.