Will Edible Oil Prices Drop? Indonesia Considers Complete Removal of Palm Oil Export Restrictions

"Failure to Reduce Soaring Domestic Palm Oil Stocks"
Industry Says No Regulation Needed If Domestic Supply Is Guaranteed

[Image source=Yonhap News]

[Asia Economy Reporter Lee Hyun-joo] Indonesia is pushing for a plan to completely remove export restrictions to reduce palm oil stockpiles.

According to local media on the 22nd, Zulkifli Hasan (Julhas), Indonesia's Minister of Trade, told reporters that they had failed to reduce the rapidly increasing palm oil stockpiles and are considering a plan to completely abolish export restrictions.

Indonesia is the world's largest palm oil producing country. However, as palm oil prices surged from the beginning of the year, palm oil companies increased exports, which led to a shortage of cooking oil in the domestic Indonesian market. In response, the Indonesian government introduced a domestic market supply obligation policy, allowing exports only up to three times the domestic supply volume under a permit system. Despite this, prices did not fall, and at the end of April, exports were completely banned.

As a result, domestic market prices and shortages were somewhat controlled, but palm oil stockpiles surged, causing the price of oil palm fruit, the raw material for palm oil, to plummet, sparking dissatisfaction among farmers. Some farmers even smuggled oil palm fruit to Malaysia. Because of this, the Indonesian government resumed exports and increased the export ratio from three times the domestic supply to five times, then to seven times. They also removed export taxes on all palm oil products until the end of next month.

According to the Indonesian Palm Oil Association, 6 million tons of palm oil must be exported by August to return stockpiles to normal levels. As dissatisfaction among farmers and the industry continues, the Indonesian government is also considering completely lifting export restrictions.

Minister Julhas said he was tasked by President Joko Widodo (Jokowi) to raise the price of oil palm fruit to the normal level of 2,000 rupiah (about 175 won) or more, explaining, "We are considering abolishing the permit system to quickly increase exports." Currently, the price of oil palm fruit is about 1,000 rupiah (about 88 won) per kilogram. However, he added that with the holiday season approaching and cooking oil demand increasing, palm oil refining companies should guarantee domestic supply to prevent shortages like before, saying, "If the industry guarantees supply, regulations will no longer be necessary."

This content was produced with the assistance of AI translation services.