12 May 2022 | 17:56 UTC

US FAS cuts Indonesia's palm oil export outlook to 12-year low in 2021-22

Highlights

Indonesia's export outlook for 2021-22 lowered to 25 million mt

China's palm oil imports to be hardest hit

Physical price of CPO FOB Indonesia has risen 30.6% in 2022

Indonesia's, the world's largest vegetable oil exporter, may see a sharp dip in outflows, the US Foreign Agricultural Service (FAS) said May 12 citing Jakarta's clampdown on palm oil exports to curb domestic inflation and cooking oil shortages.

Indonesia's export outlook for marketing year 2021-22 (October-September) was lowered to 25 million mt by FAS in its monthly oilseeds report, down 3 million mt from its outlook a month back.

"The forecast is reduced on Indonesia's slow export pace through the first 6 months of MY 2021-22 and various palm oil export policies in effect since November 2021." FAS said May 12.

While Indonesia typically consumes less than 40% of the 46 million - 48 million mt of crude palm oil, or CPO, that it produces, domestic cooking oil prices have surged in the past year on the back of record surges in international vegetable oil markets through 2021.

To address runaway food inflation and quell cases of civil unrest, Jakarta issued a mandate for palm oil producers to set aside 20% of their crude palm oil shipments for local buyers and later increased the quota to 30% in March.

On April 22, President Joko Widodo announced a complete ban effective from April 28, entirely stopping exports of crude and refined palm oil products from the country and helped push global vegetable oil prices close to record highs.

The physical price of CPO FOB Indonesia has risen 30.6% in 2022 to $1,686/mt on May 12 according to S&P Global Commodity Insights.

The prices of palm, soybean and sunflower oils touched record-highs in March according to S&P Global but eased by April due to demand rationing amid high costs.

While Indonesia accounts for more than 50% of the world total vegetable oil exports, the ban's impact on trade may be limited as industry sources expect the ruling to be a short lived one, the FAS said.

China's imports to shrink

China would be the most affected by Indonesia's palm oil ban in 2021-22, according to the FAS report, with the import outlook for the world's second largest vegetable oil buyer seen at 5 million mt, a 30% cut from its projection last month.

FAS also reduced its forecast for China's rapeseed oil, and soybean oil imports for the year.

"Global vegetable oil trade is down nearly 5% this month driven by lower Indonesia palm oil exports predominantly to China and the EU, as well as lower Ukraine sunflowerseed oil and Argentina soybean oil trade." The FAS said.


Editor:

Register for free to continue reading

Gain access to exclusive research, events and more

Already have an account?Log in here