The decision by the world’s largest palm oil producer to stop exports beginning on Thursday will raise prices for all major edible oils, including palm oil, soy oil, sunflower oil, and rapeseed oil.
Mumbai: After Indonesia’s unexpected restriction on palm oil exports drove buyers to seek alternatives, which were already in low supply owing to harsh weather and Russia’s invasion of Ukraine, global edible oil consumers had little choice but to pay top price for supplies.
The decision by the world’s largest palm oil producer to stop exports on Thursday is expected to raise prices for all major edible oils, including palm oil, soyoil, sunflower oil, and rapeseed oil, according to industry observers. This would put more burden on cost-conscious consumers in Asia and Africa, who are already facing increasing gasoline and food prices.
“Indonesia’s decision impacts not only palm oil supplies, but vegetable oils globally,” said James Fry, head of commodities consultant LMC International.
Palm oil, which is used in everything from cakes and frying fats to cosmetics and cleaning goods, accounts for about 60% of worldwide vegetable oil shipments, with top producer Indonesia accounting for roughly one-third of total vegetable oil exports. It issued the export embargo on April 22nd, until further notice, to combat increasing local costs.
“This is happening at a time when all other major oils’ export tonnages are under pressure: soybean oil due to droughts in South America; rapeseed oil due to disastrous canola crops in Canada; and sunflower oil due to Russia’s war on Ukraine,” Fry explained.
Vegetable oil prices have already climbed more than 50% in the last six months due to causes ranging from labour shortages in Malaysia to droughts in Argentina and Canada, the two largest suppliers of soyoil and canola oil, respectively.
Buyers hoped that a large sunflower harvest from top producer Ukraine would alleviate the shortage, but shipments from Kyiv have ceased due to Russia’s “special operation” in the nation.
This led importers to rely on palm oil to fill the supply gap, until Indonesia’s surprise restriction gave a “double blow” to purchasers, according to Atul Chaturvedi, head of trade group the Solvent Extractors Association of India (SEA).
Importers such as India, Bangladesh, and Pakistan will try to expand their imports of palm oil from Malaysia, but the world’s second-largest palm oil producer, Indonesia, will be unable to fill the void left by Indonesia, according to Chaturvedi.
Indonesia normally provides about half of India’s total palm oil imports, while Pakistan and Bangladesh purchase virtually all of their palm oil from Indonesia.
“Nobody will ever be able to compensate for the loss of Indonesian palm oil. Every country would suffer as a result of this “Rasheed JanMohd, head of the Pakistan Edible Oil Refiners Association, stated (PEORA).
Prices for vegetable oils reached an all-time high in February, when supply of sunflower oil from the Black Sea area were hampered.
According to a Mumbai-based dealer with a global trading organisation, the price increase increased working capital requirements for oil refiners, who were maintaining fewer stocks than usual in expectation of a price drop.
Instead, all oil prices have continued to rise.
“Refiners have gotten off to a bad start. They can no longer afford to wait a few weeks. They must make purchases in order to run the plants “explained the vendor.
Because Indonesia has extended loading until April 28, consuming nations would have ample supply for the first part of May, but may experience shortages in the second half, according to a Dhaka-based refiner.
South Asian refiners would only gradually release oil onto the market since stocks are restricted, he added.
Palm oil prices increased by over 5% over the weekend in India, the world’s largest vegetable oil importer, as the sector anticipates shortages in the coming months. Prices soared in Pakistan and Bangladesh as well.