Indonesia’s Policy Uncertainty Hinders Resumption of Palm Oil Exports, Reports Reuters

By Bernadette Christina and Fransiska Nangoy

JAKARTA – Indonesia has lifted a three-week ban on palm oil exports starting Monday. However, industry stakeholders indicate that shipments may not resume until clarification is provided on the required amount of edible oil to be reserved for domestic consumption.

As the world’s largest supplier of palm oil, providing 60% of global supply, Indonesia had halted exports of crude palm oil and related products on April 28 in a bid to reduce the soaring local prices of cooking oil. This suspension significantly impacted global edible oil markets amid ongoing supply challenges caused by the war in Ukraine.

The Indonesian Trade Ministry released new regulations on Monday, stating that companies must secure an export permit, which will only be issued to those meeting a Domestic Market Obligation (DMO). Although specific details of the DMO were not revealed, the regulation stipulates that permits will be valid for six months, and companies are required to report their shipment realizations monthly.

Previously, the DMO policy mandated producers to sell a portion of their output locally at predetermined price levels to ensure domestic supply; however, it failed to stabilize cooking oil prices.

Last week, President Joko Widodo announced the end of the export ban and expressed optimism that the price of bulk cooking oil would align with the targeted level of 14,000 rupiah (approximately $0.95) per liter. The government plans to keep 10 million tonnes of cooking oil within the country under the DMO framework, with implementation overseen by the Trade Ministry.

Traders are currently awaiting further details on the DMO regulations. A trader from a global firm noted that suppliers are focused on clearing existing orders halted by the ban, while also accepting new orders, albeit with low demand. Concerns about the DMO rules have made sellers hesitant to increase their offerings.

The government held a meeting on Monday with industry representatives, attended by Luhut Pandjaitan, the Coordinating Minister for Maritime and Investment Affairs, who is responsible for overseeing the supply and distribution of cooking oil in Java and Bali. However, the specific outcomes of the meeting have not been disclosed.

A spokesperson remarked that the goal is to ensure bulk cooking oil achieves the government’s target price and is distributed evenly across the market. Senior officials from the Trade Ministry have not yet responded to inquiries for more information.

Musim Mas, a major palm oil producer, indicated that it has not yet resumed exports, stating their priority is to supply the domestic market with cooking oil, as the government remains concerned about high retail prices. As of last Friday, the average price for bulk cooking oil was recorded at 17,000 rupiah per liter.

Some farmers celebrated the end of the export ban after protests across Indonesia last week over a significant 70% decline in palm fruit prices, as refiners had stopped purchasing supplies due to storage limitations.

"I am glad there are no longer long queues at the palm oil mills," shared Irfan, a palm oil farmer from West Sulawesi, noting that prices for palm fruit in his area were beginning to stabilize.

(Reminder: 1 USD = 14,666.0000 rupiah)