Indonesia expected to resume palm oil exports despite ban

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Indonesia expected to resume palm oil exports despite ban

Trucks with palm oil fresh fruit bunches are parked in a queue at a palm oil factory in Siak regency.

JAKARTA Reuters -- Indonesia is expected to resume exports of palm oil on Monday, despite a ban of more than three weeks, but industry traders and companies were awaiting details on the accompanying rules to secure domestic supplies of edible oil to control cooking oil prices.

The Southeast Asian country, the world's biggest palm oil producer, halted exports of palm oil on April 28 in an effort to reduce local prices of cooking oil, causing global edible oil markets to struggle with sunflower oil supply shortages due to the war in Ukraine.

President Joko Widodo announced last week the end of the ban on exports of crude palm oil and other derivative products, and expressed confidence that bulk cooking oil prices were heading toward a target level of 14,000 rupiah $0.9546 per liter, even though they were currently higher in some areas.

Palm oil, which is used in everything from margarine to shampoo, comprises a third of the world's vegetable oil market, with Indonesia accounting for about 60% of the supply.

Indonesia will impose a so-called Domestic Market Obligation DMO policy to ensure supply security, whereby producers are required to sell a portion of their products locally at a certain price level.

According to Chief Economics Minister Airlangga Hartarto, Indonesia plans to retain 10 million tons of cooking oil supplies at home under the DMO rules, and that their implementation will be regulated by the Trade Ministry.

Traders were on Monday waiting for details on the DMO and other rules to be made public.

Sellers are trying to clear pending quantity that was stuck because of the ban. A Mumbai-based dealer with a global trading house said they are accepting new orders but demand is not great.

The trader said that they are not very keen to sell a lot before understanding DMO rules.

Palm oil futures from Malaysia went up 1.67% on Monday because of Indonesia policy uncertainty.

Asked whether palm oil producer Musim Mas had resumed exports, Carolyn Lim said that the company was still focused on flooding the domestic markets with cooking oil to reach the target retail price, while the Indonesian government was still concerned about high retail prices.

The average price of bulk cooking oil was at 17,000 rupiah per liter, according to Trade Ministry data.

Some farmers cheered the end of the export ban.

Last week, farmers staged rallies across Indonesia to protest a 70% drop in palm fruit prices as refiners stopped accepting supplies because palm oil storage filled up.

Palm oil palm oil farmer Irfan said palm fruit prices in his area of West Sulawesi had started to stabilise.