Business Maverick

Business Maverick

Palm Oil Soars on Indonesia Ban in Risk to Global Food Inflation

Palm Oil Soars on Indonesia Ban in Risk to Global Food Inflation
Harvested palm oil fruit bunches sit in the back of a truck on the side of a road in East Kalimantan, Borneo, Indonesia, on Wednesday, Nov. 27, 2019. For Jakarta, a city on the island of Java saddled with some of the worst superlatives in the region?—most polluted, most congested, fastest sinking?—the floods were an old story, the third time deluges have killed dozens since 2007. The problems have become so overwhelming that, even before the latest catastrophe, President Joko Widodo had decided to build a new capital 1,200 kilometers away on the island of Borneo.

Palm oil rallied after top producer Indonesia said it will ban all exports of cooking oil, a move that threatens to worsen global food inflation. 

Futures for July delivery rose as much as 6% to 6,738 ringgit ($1,550 or R24 242,85) a ton in Kuala Lumpur, the highest since March 11. Indonesia said on Friday that the shipment halt will start from April 28 and last until the government deems a domestic shortage resolved.

The move by Indonesia, which accounts for almost 60% of global palm oil supply, adds to a raft of crop protectionism around the world since the war erupted in Ukraine, as governments seek to protect their own food supply with agriculture prices surging. The ban threatens to further stoke global food inflation, which has been accelerating at a rampant pace, and raises the risk of a full-blown hunger crisis.

“The halting of shipments of the cooking oil and its raw material, widely used in products ranging from cakes to cosmetics, could raise costs for packaged food producers globally,” said Avtar Sandu, senior manager of commodities at Phillip Nova.

The surprise move has “left many questions unanswered especially as it comes at a time when other edible oils like sunflower oil supplies are facing issues due to violence in the Black Sea region”, he added.

While limited supply and soaring prices are set to worsen inflation of food items like salad dressing and mayonnaise in wealthy economies like the US, developing nations like India are set to feel the worst impacts. Such countries depend on imports of palm oil as a cheaper alternative to more costly soybean, sunflower and canola oil. BM


Comments - Please in order to comment.

Please peer review 3 community comments before your comment can be posted

A South African Hero: You

There’s a 99.8% chance that this isn’t for you. Only 0.2% of our readers have responded to this call for action.

Those 0.2% of our readers are our hidden heroes, who are fuelling our work and impacting the lives of every South African in doing so. They’re the people who contribute to keep Daily Maverick free for all, including you.

The equation is quite simple: the more members we have, the more reporting and investigations we can do, and the greater the impact on the country.

Be part of that 0.2%. Be a Maverick. Be a Maverick Insider.

Support Daily Maverick→
Payment options