Indonesia suspends all exports of palm oil

A worker loads fresh fruit bunches to be distributed from the collector site to CPO factories, as Indonesia announced a ban on palm oil exports effective this week, in Riau province, Indonesia, on Tuesday.

JAKARTA (AFP-Jiji) — Indonesia began imposing a complete ban on palm oil exports Thursday, as the world’s largest producer of the commodity risked destabilizing a global vegetable oil market already hitting peak prices.

The archipelago nation is facing a domestic shortage of cooking oil as well as soaring prices, with consumers in several cities having to queue for hours in front of distribution centers to buy the essential commodity at subsidized rates.

Authorities in Southeast Asia’s most populous country fear the scarcity and rising costs could provoke social tensions and have moved to secure supplies of the product, which is used in a range of goods such as chocolate spreads and cosmetics.

In a last-minute reversal late Wednesday, they clarified the embargo would include all exports of the oilseed and not only products intended for edible oils, as indicated a day earlier.

“All products,” including crude palm oil, “are covered by the Ministry of Trade regulation and will be enforced,” said Coordinating Minister for Economic Affairs Airlangga Hartarto.

President Joko Widodo said supplying the country’s 270 million residents was his government’s “highest priority.”

“As the world’s largest palm oil producer, it is ironic that we are having difficulties getting cooking oil,” he said.

Indonesia produces about 60 percent of the world’s palm oil, with one-third consumed by its domestic market. India, China, the European Union and Pakistan are among its major export customers.

The months-long shortage has been exacerbated by poor regulation and reluctance among producers to sell at home due to high international prices that have made exports more profitable.

Jakarta plans to resume exports when the price of bulk cooking oil in local markets has fallen to 14,000 rupiah (97 cents) per liter, having rocketed 70 percent in recent weeks to 26,000 rupiah ($1.80).

Vegetable oils are among a number of staple food items that have seen prices hit record highs in recent weeks, following Russia’s invasion of agricultural powerhouse Ukraine, according to the United Nations Food and Agriculture Organisation.

The supply of palm oil has been problematic since the beginning of the year, with people often spending hours in lengthy queues at distribution centers to obtain it.

“Cooking oil was difficult to find, even in bulk,” Lius Antoni, a consumer, told AFP. “I finally decided to reduce the use of cooking oil.”

For Ade Neni, who sells popular fried snacks called gorengan, the ban has been a blow for business.

“The high oil prices have reduced my sales,” she said. “I had to increase the price of my gorengan.”

Eddy Hartono, head of the Indonesian Palm Oil Producers Association, said the new measures have already caused plantation farmers’ incomes to plummet.

“There is no problem of supply, but of distribution,” he said.

Public discontent with rising food prices has contributed to a decline in President Widodo’s popularity, according to recent polls, and prompted protests in several cities.