Pressure on cooking oil prices, already high due to Russia’s invasion of Ukraine, is expected to intensify in the wake of Indonesia’s decision to restrict exports of palm oil.
Indonesia, one of the world’s largest producers of palm oil, caught global markets by surprise April 22 with the announcement that to control high domestic prices for cooking oil, it was cutting off exports. Government officials clarified on April 25 that the ban extends only to refined palm oil, not crude – but the former comprises the majority of shipments.
The Ukraine invasion has blown up the market for sunflower oil, of which some 80% of the world’s supply came from Ukraine and Russia. This has had a cascading effect on edible oil supplies in general, as other oils have to fill the gap.
Palm oil futures in Malaysia, another major exporter, rose 7% to a record high on April 21 on news of Indonesia’s ban, although they fell back 2.1% after Indonesia clarified that the ban applies only to refined oil.
“Due to a shortage of sunflower oil as a result of the Russia-Ukraine conflict, a lot of companies were returning to palm oil, so Indonesia’s ban is another setback,” says Ramsey Baghdadi, a consumer analyst with GlobalData. “When choosing the next potential ingredient supplier, transparency will be very important.”
