On the 28th of April 2022, the government of Indonesia banned all exports of palm oil and derivative products to relieve pressure on domestic prices. This temporary ban is set to remain effective until domestic prices reach IDR 14,000/litre. Global palm oil prices reached record highs in April on account of the export ban from the top palm oil exporter amid a price rally in the wider vegetable oil complex. However, global palm oil prices have since declined following an increase in production in Malaysia and buyers switching to alternative oils as they are simply unwilling to pay the high prices. According to the Malaysian Palm Oil Board (MPOB) report released on 10th May, palm oil production was 1.46 million tonnes; up 3.06% month-on-month (m-o-m) in April. Despite the m-o-m increase in production, the estimate fell short of market expectations. In addition, palm oil exports from Malaysia declined by 17.7% m-o-m to 1.05 million tonnes in April, causing end stocks to reach their highest level since November 2021 (+11.5% m-o-m to 1.6 million tonnes).
According to market participants surveyed by Mintec, palm oil stocks in Indonesia reached 5.5 million tonnes (higher than average for this time during the season) on 11th May. Market participants thus anticipate that the export ban may be short-lived as storage capacity is estimated at 6.5 million tonnes and is expected to be filled in about two weeks’ time. Global palm oil prices could decline further if the export ban is lifted as excess supply would need to be sold to free up storage space. The Mintec Benchmark price for Indonesian palm oil was assessed at IDR 22,705/litre on 6th May, down by 10.7% since the implementation of the export ban on 28th April.
