KUALA LUMPUR – The ban on palm oil exports from Indonesia is expected to have adverse effects on the global edible oils and fats market.
Indonesian President Joko Widodo recently stated that the country would suspend palm oil exports beginning April 28 in order to assure an abundant supply of affordable cooking oil in the nation’s own domestic market.
For that reason, Deputy Minister of Plantation Industries and Commodities II, Datuk Seri Dr Wee Jeck Seng highlighted that the move is expected to increase prices for palm oil and competing oils in the world market since Indonesia is one of the world’s largest producer and exporter of palm oil.
He explained that Indonesian palm oil accounted for 59% of the global palm oil output and 56% of exports last year with the additional 30% of global oils and fats exports as well.
“As such, Indonesia’s extreme move would undoubtedly have a profound effect on other nations, particularly big palm oil importers such as China, India, and the European Union.
“Due to the fact that Malaysia is the world’s second largest producer and exporter of palm oil, Indonesia’s ban is expected to raise export demand for Malaysian palm oil,” Wee said to reporters recently at a breaking of fast event in Tanjung Piai’s parliamentary constituency.
Despite that, he remarked that Malaysia is unlikely to be able to fill the huge demand gap left by Indonesia as the nation is still facing ongoing labour shortages.
“As a result of this demand-supply imbalance, palm oil and other competing oils’ prices will skyrocket,” he said.
The increasing export demand is expected to exacerbate competition for palm oil raw materials, posing more challenges for local palm oil downstream businesses.
“However, the crude palm oil, crude palm kernel oil, and processed palm kernel oil export tax policies are likely to play a role in maintaining the supply of palm oil raw materials for these local downstream businesses,” he added.
In terms of the domestic cooking oil retail market, the government’s decision to impose a price ceiling on palm cooking oil sold in polybags and a ceiling price on one kilogramme (kg) to five kg bottles of palm cooking oil will shield Malaysian consumers from the effects of global palm oil price increase.
“However, the government would be required to shoulder the increased cost of cooking oil subsidies as a result of the market’s increase in palm oil prices to safeguard the welfare and interests of Malaysian consumers,” Wee explained.
Additionally, Wee said the government will conduct a study of the short and long-term consequences of Indonesia’s ban to ensure that appropriate measures taken to address the issue are suitable.
“The government is constantly monitoring the situation and is prepared to take appropriate action if necessary,” the Tanjung Piai MP said.
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