Indonesia has rolled back a palm oil export ban, bringing relief to international buyers and Indonesian farmers after protests against the export ban earlier this week. The government will ask producers to reserve part of their production for the domestic market as the price of palm oil in Indonesian shops remains above the government target of 14,000 rupiah ($0.096, €0.90) on liter.
Why did Indonesia ban palm oil exports?
Price volatility for Indonesian consumers has been a concern of President Joko Widodo since late November, with gradually increasing restrictions on exports introduced until the export ban was declared in April. At the time, Widodo promised to monitor prices, after large protests in the capital Jakarta over high food prices. Jokowi, as the president is known, said on May 20 that he expects prices for domestic consumers to continue to fall even if exports pick up, and that the government would monitor prices and act to retain more palm oil in the country if necessary.
Groups of farmers had protested earlier this week against the export ban, which had hit their incomes at a time when world prices were rising. “Based on the current supply and price of cooking oil and considering that there are 17 million workers in the palm oil industry, both farmers and ‘other support staff, I have decided that the export of cooking oil will reopen on Monday, May 23, ” PA The news agency reported Widodo as saying.
Economy Minister Airlangga Hartarto said the government would impose a domestic market obligation (OMD) on palm oil producers to ensure that 10 million tonnes of cooking oil stays at home. “The Ministry of Commerce will determine the size of the DMO to be completed by each producer and the mechanism for producing and distributing cooking oil to communities,” the Coordinating Minister for Economic Affairs said during a virtual briefing, according to Reuters.
Why is palm oil so important?
April’s decision to ban exports had spooked global markets, which depend on Indonesia to meet 60% of global demand. The product is crucial for the production of everything from food products to shampoo to biodiesel. When Widodo’s government banned exports, prices jumped more than 200% on the world market.
Cooking oil prices were already high after Russia attacked Ukraine, the two countries responsible for more than half of the world’s sunflower oil production, according to the United Nations food and agriculture (FAO). This caused a spike in the prices of all cooking oils, including palm oil. Supply for Indonesian consumers has dwindled, with only 33% of Indonesian demand satisfied in March and prices rising accordingly. Airlangga said supply has now improved significantly, with 109% of demand now available domestically.
uh/kb (AP, Reuters)