On May 19, Indonesian President Joki Widodo announced that his country would end a ban on palm oil exports that had been in place since April 23, throwing world vegetable oil markets into temporary confusion. Widodo said exports would resume May 23.
Indonesia is the world’s largest palm oil supplier. The restoration of exports followed a series of contradictory moves. The country had initially announced a ban on the export of all palm oil products; then said it only applied to refined products, not raw palm oil. But it quickly reversed itself again before restoring exports.
In 2021, palm oil production fell, while global prices surged. In April 2020, a ton of Indonesian crude palm oil was priced at $545 on the European market. Two years later, that jumped to $1,700.
Palm oil is a primary cooking oil domestically, so the high prices caused concern among Indonesian government officials. Exports had already slowed from the last half of 2021, especially November, when a higher export tariff took hold.
In a May report, the United States Department of Agriculture said that marketing year 2021/22 (October to September) estimates of Indonesia palm oil exports were lowered by 3.0 million tons in May, down to a 12-year low of 25.0 million tons. The forecast is reduced on Indonesia’s slow export pace through the first six months of marketing year 2021/22 and “various palm oil export policies in effect since November 2021.” According to the USDA, “industry sources expect it to be short-lived and therefore have a limited impact on trade.” That proved to be true.
High global prices for palm oil have proved beneficial to the Indonesia rupiah. According to The Diplomat, a publication that focuses on East Asia, high palm oil prices have stabilized the rupiah. But high domestic prices are unpopular and hurt the Indonesian consumer. The government has tried price regulations, export quotas and investigations of palm oil executives to assuage popular discontent.
David Murray can be reached at [email protected].
