19 Jan 2022 | 11:38 UTC

Indonesia to tighten palm oil export policy to ease domestic cooking oil prices

Highlights

Jakarta caps domestic cooking oil prices at Rupiah 14,000/liter

To provide 1.3 million mt of subsidized palm oil over six months

Licensing mechanism to regulate exports of CPO, olein and UCO

Indonesia is to restrict palm oil exports, especially crude palm oil, refined palm olein and used cooking oil, as the world's largest producer and exporter looks to put a cap on surging domestic cooking oil prices.

"This policy change is so that the need for domestic cooking oil raw materials remains available so that cooking oil prices remain in a stable condition," trade minister Muhammad Lutfi said.

The new regulation -- which comes into force Jan. 24 -- will require exporters to declare their plans as well as obtain licenses confirming their contribution to the government's one-price cooking oil policy, the trade ministry said.

It will cap the price at Rupiah 14,000/liter ($1/liter) for the six months starting Jan. 19, Lutfi said.

Indonesia will earmark Rupiah 7.6 trillion to finance the program and will supply about 1.5 billion liters of subsidized cooking oil (roughly 1.36 million mt) in the next six months. Palm oil producers will be reimbursed for the difference in price between the domestic price cap and higher market rates.

Online marketplaces in Indonesia showed that cooking oil brands were selling 5-liter packages of refined palm oil for around Rupiah 110,000, 62% higher than the Jan 19 ceiling.

According to price assessments by S&P Global Platts, the physical market price of CPO FOB Indonesia rose about 25% in the past six months to $1,345/mt on Jan 18, as supply issues and high demand pushed international vegetable oil markets into an extended price rally across 2021.

Third-month crude palm oil futures on Malaysia's Bursa Malaysia Derivatives exchange, which underpin international palm oil prices, rose 1.8% to MR 5,195/mt on Jan 19, trading close to its historic record of MR 5,220/mt.


Editor:

Register for free to continue reading

Gain access to exclusive research, events and more

Already have an account?Log in here