Indonesia has lifted its export prohibition on crude palm oil

Indonesia's Agriculture Ministry on Monday said shipments of crude palm oil would be exempt from a proposed palm oil export ban, according to a copy of an official letter sent to local government leaders.

The letter, which was reviewed by a ministry official, said the ban would include refined, bleached and deodorized (RBD) palm olein. It was still unclear on Monday whether products such as RBD palm oil and palm stearin were affected. Indonesian President Joko Widodo announced the ban on Friday evening. It comes into force on April 28th. Jokowi, as the president is known, said on Friday that the export of cooking oil and its raw material would be banned, but gave no details.

     

Traders were surprised by Jokowi's announcement that Indonesia, the world's largest palm oil producer, would stop exporting cooking oil to ensure the availability of domestic food products. Although an exemption of crude palm oil from export restrictions is positive for world markets, the bulk of Indonesia's palm oil exports are in the form of processed oils, which remain affected by the ban. World cooking oil stocks have already been stifled by adverse weather conditions and Russia's invasion of Ukraine's top grain producer, and global consumers now have no choice but to pay a heavy price for supplies while global food inflation is at an all-time high. Benchmark Malaysian crude futures fell 2.09% after it was revealed the ban only affected RBD olein, after it rose nearly 7% to its highest level in six weeks.

"Massive short-covering died out after it was revealed that the ban only affected bulk and packaged olein from Indonesia," said Paramalingam Supramaniam, director of Selangor-based brokerage firm Pelindung Bestari. He said there were still fears that crude palm oil would be put on the ban list as the raw material for RBD palm olein.