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Indonesia asks palm oil exporters to keep 20% of supply for domestic use

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Indonesia asks palm oil exporters to keep 20% of supply for domestic use


Exporters required to show export, domestic selling plans

Third-month palm oil futures hit all time high on BMD

Shipment loading may slow due to licensing requirements

  • Author
  • Aditya Kondalamahanty
  • Editor
  • Debiprasad Nayak
  • Commodity
  • Agriculture

Indonesia issued a mandate for palm oil producers on Jan. 27 to set aside 20% of their crude palm oil shipments for local buyers as the world's largest vegetable oil producer and exporter tries to reign in high domestic edible oil prices.

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The country also set a price cap of Rupiah 9,300 /kg ($0.67) for crude palm oil and Rupiah 10,300/kg for palm olein effective Jan. 27, trade minister Muhammad Lutfi said in a press conference.

The move follows a Jan. 18 announcement requiring palm oil exporters to declare how much CPO, refined, bleached, and deodorized (RBD) Palm Olein and Used Cooking Oil (UCO) they plan to sell internationally and to the domestic market to obtain permits for their exports for the next six months.

At the time Lutfi had said that the policy change will help ensure a steady supply of raw material for Indonesia's Rupiah 7.6 trillion ($528 million) one-price cooking oil policy, which will supply about 1.5 billion liters of subsidized cooking oil (roughly 1.36 million mt) in the next six months.

The Jan. 27 regulation was widely expected by the market, which was also expecting Jakarta to mandate sellers to commit 25% of their cargos for domestic use, sources told S&P Global Platts.

Third-month crude palm oil futures on Malaysia's Bursa Malaysia Derivatives exchange, which underpin international palm oil prices, rose as high as 3% to MR5,500/mt ($1,310.3) on Jan. 27, and closed at an all-time high of MR5,441/mt.

Before the new rule, exporters were only required to do customs declarations for shipments.

"I think we will start seeing exports slowing after the Jan. 28 or Jan. 29 as vessels which arrive from tomorrow will have to clear the new licensing requirements," an Indonesian palm oil analyst told Platts.

Once a vessel arrives, it has a limited number of days to load and depart before the export permit expires. "Our vessel arrived today, and we are trying to push for berthing by tomorrow as we already got our export permit three days back. If she cannot berth tomorrow, the permit will expire," a source said.

Indonesia expects to increase its palm oil exports to 34.44 million mt in 2022 from 33.38 million mt in 2021, the Indonesian Palm Oil Association (Gapki) said Jan. 26 a day before the announcement of domestic mandates.

The country along with Malaysia accounts for 85% of the world's palm oil supply.