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Indonesia cuts palm oil exports

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Pay attention to the oil level! Indonesia, which produces 60% of palm oil in the world, announced that it would halve its exports, ceasing Thursday, April 28, sending its cooking oils to the rest of the world. The ban should be lifted when the price goes down: “We will reassess the export ban policy regularly”said the Ministry of the Economy.

Calm the Rumble

President Joko Widodo must calm the streets. The increase in the price of this oil by more than 40% in recent months has caused social tensions.

Queues have thus formed in front of the supermarkets, and the students have protested against the fact that this essential good has become inaccessible. The Indonesian population feels that it is a victim of soaring world prices on the oil markets.

Ukraine has drastically reduced its production even though it is the leading exporter of sunflower oil. Canada, the leading exporter of rapeseed oil, saw its production affected by the drought, just like South America, whose production of soybean oil was limited.

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The whole oil market is deregulated

Palm oil accounts for a good third of the global oil market. Indonesian producers have preferred to sell for export rather than on the domestic market, which normally absorbs a third of national production.

After introducing price controls and then export restrictions at the start of the year, the Indonesian government has cracked down. “There is little information on the potential duration of this ban, but this measure is difficult to sustain in the medium term”explains Alain Rival, a researcher based in Indonesia for CIRAD, the French agricultural research organization for the sustainable development of tropical regions.

The ban is sure to fuel the rise in global palm oil prices. At nearly €1,500, a ton of palm oil is already at its historic level. It is difficult in this context to imagine the government depriving itself of such a financial windfall for a long time.

There are not any alternatives

For some countries highly dependent on Indonesian exports, the blow is hard. In India, the world’s largest importer, palm oil accounts for 40% of vegetable oil usage. “There are no surpluses anywheresays a commodity trader. In the event of a restriction on supply, demand is rationed, like what is happening in Europe for sunflower oil. »

Indeed, it is impossible to increase production: Malaysia, the world’s second largest producer of palm oil, does not have the capacity, as Alain Rival explains: “There is no more land available in East Asia, so impacts on global production will be very limited. There is no expected resumption of deforestation for example. »

For developing countries, the use of palm oil has an economic motivation: despite the surge in prices, it remains much cheaper than its competitors. The FAO index, the antenna dedicated to agriculture and food of the United Nations, for vegetable oils is at a historic level, after having increased by 23% in March. Also, the oil crisis could be one of the first visible consequences of the food crisis anticipated by world decision-makers.

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