Indonesia, the world’s biggest palm-oil exporter, is facing a shortage of cooking oil — and it’s going to affect the price of everything from cheese to candy bars


Indonesia accounts for half of the world’s supply of palm oil, the world’s most widely used vegetable oil. A domestic shortage of cooking oil has prompted Indonesia to put a blanket ban on palm-oil product exports. Half of all packaged products that Americans consume contain palm oil. Loading Something is loading.

Indonesia, the world’s largest edible oils exporter, said a domestic shortage of cooking oil has prompted it to impose a blanket ban on the export of palm oil starting today.

Indonesia accounts for about half of the world’s supply of palm oil, the world’s most widely used vegetable oil. It’s used for cooking and for the production of thousands of consumer products, including biscuits, detergents, and lipsticks.

Retail prices of cooking oil have soared in Indonesia as palm-oil producers boosted exports on the back of rising global vegetable oil prices, according to Channel NewsAsia. This in turn caused a supply crunch at home.

“As the world’s largest producer of palm oil, it is ironic that we actually have difficulty getting cooking oil,” said Indonesian President Joko Widodo, according to an official transcript. “As president, I cannot allow that to happen,” he added.

Retail prices of cooking oil in Indonesia have gained over 40% so far this year, Reuters reported. The price spike has prompted protests and sent Widodo’s approval rate down 12% from February to April, according to the news agency.

The Southeast Asian country surprised markets when it first announced the ban on palm-oil exports on Friday. The announcement sent benchmark Malaysian palm-oil futures soaring 7% on Monday before ending the day 2% lower as the country said the ban would exclude some palm-oil products. On Wednesday, prices soared 10% to hit the upper price limit head of the impending ban — but that was before Indonesia said later in the day that it would be imposing a blanket ban. Malaysian palm-oil futures were over 1% lower at midday on Thursday and up about 50% year-to-date.

Indonesia’s palm-oil ban will be in place until the bulk of cooking oil in Indonesia falls to 14,000 rupiah ($0.97) per liter, Reuters reported, citing the country’s chief economic minister, Airlangga Hartarto. Bulk cooking oil in Indonesia was offered in the range of 19,000 to 20,000 rupiah ($1.31 to $1.38) on Wednesday, the news outlet reported, citing a senior trade association official.

“Once the local need is fulfilled, surely I will revoke this export ban because I understand how the government needs taxes, needs overseas earnings, and needs a trade surplus,” said Widodo, per Bloomberg. But “the people’s need is a more important priority,” he added.

Palm oil has been linked to the widespread destruction of rainforests and adverse impact on local communities, but it is also an efficient crop that has improved rural development in many regions, according to the World Wide Fund for Nature. It’s an important cash crop for Indonesia with exports worth about $30 billion in 2021, the data provider Statista showed.

Global vegetable oil prices were already rising due to the war in Ukraine, as the country is a major sunflower oil producer. Now, Indonesia’s palm-oil export ban is expected to worsen global food inflation as prices of competing edible oils surge in response. Prices of benchmark Chicago soybean oil futures hit an all-time high after Indonesia’s Wednesday announcement of its blanket ban, according to Bloomberg.

“Given that half of all packaged products Americans consume contain palm-oil, we’re likely to see impacts to food products such as margarine, confections, cooking oil, and dairy products like sour cream, cheese, cream cheese spread, and condensed milk,” said Julie Gerdeman, CEO of Everstream, a supply chain risk analytics company.

“Should the export ban remain, we can also expect to see production decreases and consumer price increases to popular household products offered by major food manufacturers (think chocolate and candy bars), all of which depend on sourcing palm-oil from Indonesia,” Gerdeman told Insider.


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