A Sixfold Increase in Indonesian Palm Oil Export Ahead of the Holy Month

Jakarta: Following Indonesia's announcement that it will halt some export permits in order to lower cooking oil prices ahead of Ramadan (Ramzan) next month, the largest exporter of Palm Oil in the world, the price of the commodity spiked globally. Indonesia currently has a regulation known as a Domestic Market Obligation (DMO) that permits Palm Oil producers to export six times as much as they have domestically sold. The exporters will be permitted to exercise their rights until things have cooled down in the Indonesian market. A third of the export quota might be utilized immediately, with the rest becoming available after 1 May 2023.

Given that one of the largest suppliers of Palm Oil is Indonesia, any disruption in supply with unchanged demand will undoubtedly have an effect, but perhaps not right away, given that the biggest importer, India, may now have the stock. Eight million tonnes of Palm Oil are imported into India each year, making up almost 40.1% of the total consumption of edible oils. Supply disruptions might have a significant impact because Palm Oil and its derivatives are used to make soap, shampoo, biscuits, and noodles, among other products. However, if the pattern persists, prices on the world market will inevitably rise.

Indonesia previously banned Palm Oil export, but since it suffered greatly in August, it may decide not to do so at this time. As they ran out of storage space and the fruits began to rot, Indonesian officials asked Indian importers to restart buying, which led to farmers' complaints when the restriction was approved in its local market.

As per the ChemAnalyst database, the prices are likely to be raised for Palm Oil in the global market, and this is a short-term move by Indonesia to lower the price of Palm Oil as a significant amount of Palm Oil is produced in Indonesia. The effect will be minimal in the long run because Ramzan is considered.