Indonesia’s palm oil export ban replaced with a domestic market obligation

May 20, 2022

1 mins read

The Indonesian palm oil export ban imposed on 28th April, which sent the global vegetable oil market spiralling, has been lifted in less than a month. Palm oil exports from Indonesia can recommence from the 23rd of May, as announced by the Indonesian President in a briefing on Thursday, 19th of May. Following this announcement, on Friday, 20th May, the government declared the reimposition of a domestic market obligation (DMO) to ensure 10 million tonnes of palm oil is available for local supply.

Indonesia has implemented several regulations to keep a lid on domestic cooking oil prices since November 2021, amid soaring global vegetable oil prices. The relaxation of the export ban came as no surprise to the market. Market participants expected the ban to be short-lived because of inadequate storage facilities to store excess output, as Indonesia consumes less than 40% of its annual palm oil output. While the export ban did not meet the intended target of lowering domestic palm oil prices to IDR 14,000 per litre, there was a slight improvement in domestic supply and prices. The Mintec Benchmark Prices (MBP) for Indonesian palm oil FOB was assessed at IDR 22,956 per litre on 13th May, down by 9.7% since the implementation of the export ban. Despite the relief from the ban and expectations of improved supply, global palm oil prices could remain elevated due to the DMO and general uncertainty surrounding the details of Malaysia’s (second-largest palm oil producer) export tax.

Roxanne Nikoro
Roxanne Nikoro

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