President Joko Widodo announces a ban to ensure the availability of food in the country. However, the measure risks driving up the price of vegetable oils even more. Small local producers will be the main losers.
Jakarta (AsiaNews) – Starting tomorrow, Indonesia will no longer export palm oil to ensure the availability of food and cooking oil in the country, President Joko Widodo announced last week because of domestic shortages in raw materials.
“I will continue to monitor and evaluate the implementation of this policy, so that the availability of cooking oil in the country is abundant at affordable prices,” the president said in a statement.
The current lack of alternatives to palm oil, aggravated by the war in Ukraine, a major sunflower oil producer and exporter, has already driven up the prices of vegetable oils worldwide.
In recent months, the price of crude palm oil in Indonesia rose by about 40 per cent and the new ban, experts say, risks further worsening the situation.
Palm oil is not only used for frying and cooking, but goes into the production of biofuels and is found in a wide range of products, including food, cosmetics and detergents.
Earlier this year, Indonesia cut exports and limited the purchase of palm oil to two litres per person.
Among producers, the president's decision came as a shock. If the ban “has a negative impact on the sustainability of the palm oil sector, we will ask the government to evaluate the policy,” said Tofan Mahdi, spokesman for the Indonesian Palm Oil Association (GAPKI[*]).
About 60 per cent of all palm oil exported worldwide comes from Indonesia, with India and China as the largest consumers.
In 2020-2021 India imported 8.5 million tonnes of palm oil, while China bought at least 6.8 million, which is expected to increase to 7.2 million in 2021-2022.
Total exports from Indonesia and Malaysia for the same period is expected to reach 50.6 million tonnes, up from 47.7 million.
Last year, 16.3 million tonnes were sold in Indonesia alone, while over 30 million tonnes were exported.
According to the Palm Oil Agribusiness Policy Institute (PASPI), palm oil farmers will be hit hard by Jokowi's export ban. As a result, fresh fruit bunch prices at home are expected to fall.
In some regions, prices have already dropped by 30 to 50 per cent since the crude palm oil export ban was announced, this according to Henry Saragih, chairman of the Indonesian Farmers Union (SPI[†]).
In Riau and North Sumatra, local farmers said that prices have dropped to between 1,700 and 2,000 Indonesian rupees (between 11 and 14 cents US) per kilo.
It is obvious that, once the ban goes into effect, local producers will not benefit from the increased global demand for palm oil.
Speaking to AsiaNews, a local producer expressed resentment towards the president’s policy. “I have nothing to say except that we are only small local producers and not large exporters,” he said.
[*] Gabungan Pengusaha Kelapa Sawit Indonesia.
[†] Serikat Petani Indonesia.