NEW YORK (AFP) – Indonesia’s decision to suspend palm oil exports in the face of domestic shortages has pushed vegetable oil prices to new highs, further tightening a market already on edge due to the war in Ukraine and global warming.
The prices of palm, soybean, European rapeseed and even its Canadian GMO counterpart, canola oil, have reached historic highs following Indonesia’s announcement on Wednesday.
“We already had problems with soybeans in South America, with canola in Canada,” said economics professor at Paris-Dauphine University in France Philippe Chalmin, stating that both crops had been severely affected by extended droughts.
Then came devastation for the “sunflowers in Ukraine” due to Russia’s destructive invasion, he added.
Palm oil is the most consumed vegetable oil in the world, and Indonesia accounts for 35 per cent of global exports, according to chairman of LMC consulting firm James Fry. Indonesia’s export ban is designed to bring down prices in the country and limit shortages, according to authorities.
But Chalmin said the move “comes at the worst time”.
“The rise in prices dates back to last year already and it is exacerbated by the Ukrainian conflict,” he explained.
Rich Nelson of the agricultural market research and trading firm Allendale said “the industry believes it’ll last maybe for one month, perhaps two”.
But in the meantime, prices are skyrocketing in a market that was “already accelerated”, he said.
Unlike other oilseeds, palm fruit does not keep once picked and has to be processed immediately, Fry said.
Indonesia’s palm oil storage system, which was already holding substantial reserves, is now under further stress, he added.
Even though the price of vegetable oil, in addition to other agricultural commodities, has been rising for months, demand has yet to slow.
“It’s difficult to ration demand for food commodities with higher prices,” said chief commodities economist at StoneX Financial Arlan Suderman. Palm oil, which is used heavily in processed food such as instant noodles and baked goods, is also present in other consumer products, such as personal care items and cosmetics.
“Eventually it will trickle down,” said Paul Desert-Cazenave of consulting firm Grainbow, “but it’s still too early to measure price increases to consumers”.
In the short term, the only oilseed that might be able to provide some relief on the vegetable oil market is the soybean.
The United States and Brazil, the world’s two top soybean exporters, still have available stock, even though more shipments from the countries would only have a marginal impact on edible oil prices.
The world’s top rapeseed exporter, Canada, meanwhile said on Tuesday that it expected a seven per cent decline in acreage devoted to the GMO rapeseeds used in canola oil.
Despite the current turmoil, Indonesia and Malaysia, the world’s second-largest exporter, have maintained their respective programmes blending palm oil in their biofuels.
To make matters worse, many of the major palm oil importers, mainly Egypt, Bangladesh and Pakistan, have seen their currencies depreciate significantly in recent months, said president of Global Commodity Analytics and Consulting Michael Zuzolo.
