On April 22, when Indonesian President Joko Widodo announced that he would stop exporting palm oil derivatives, it sent the world of crude edible oil and derivatives into a tizzy, with prices of crude palm oil surging 10 per cent within a few days. Indonesia is the world's largest producer and exporter of crude palm oil and various derivatives, exporting 2.2 million tons every month. Malaysia, which exports 1.5 million tons per month, is second. Widodo was unclear on whether the ban would cover all palm derivatives, so edible oil makers in India were hoping for a partial ban. But their hopes were shattered on April 27. Jakarta has imposed a ban on exports of crude palm oil, refined palm oil, refined, bleached and deodorised palmolein, palm oil mill effluent, and used cooking oil.
According to Sudhakar Desai, CEO of Emami Agrotech and President of Indian Vegetable Oil Producer s Association IVPA, some 700,000 tons of crude edible oil are imported by India per month, 300,000 tons are soya and the rest is crude sunflower oil. He says that most of the shortage due to the ban by Indonesia is being met by imports from Malaysia.
Even before Widodo's announcement, the edible oil market had been on fire. Short-term factors like stagnating palm oil in the two countries and soya oil in Argentina have added to the woes as well as long-term factors like the use of palm oil in bio-fuel by Indonesia and Malaysia are impacting supplies. The war in Ukraine has aggravated the situation as the region supplies 90 per cent of the sunflower oil demand for India - adding fuel to the rising prices of alternative oils like soya.
Since the Pandemic, prices have gone up by 40 -- 60 per cent based on type of oil industry veterans like Angshu Mallick, CEO of Adani Wilmar, feel prices may have peaked. He says that prices may start coming down because we have enough supply to meet domestic demand after the Ramadan holidays. Mallick believes that the ban on exports may not last beyond mid-May, as Indonesia is a surplus country and a prolonged export ban could hurt its finances. On May 5, the first day after the Ramadan holidays when palm oil trading resumed in the international market, rates fell by 3 per cent due to lack of demand, as most importers had stocked up in anticipation of a shortage.