Indonesia Ban On Palm Oil Exports Spurs Higher Food Prices

Indonesia, the world's top palm oil producer, announced plans to ban exports of the most widely used vegetable oil on Friday in a shock move that could further inflame surging global food inflation, Fransiska Nangoy reported for Reuters.

Photo Insert: Palm fruit transportation

The halting of shipments of the cooking oil and its raw material, widely used in products ranging from cakes to cosmetics, could raise costs for packaged food producers globally and force governments to choose between using vegetable oils in food or for biofuel. Indonesia counts for more than half of the global palm oil supply.

Household product and food companies including Procter & Gamble Co., Nestle SA, and Unilever PLC are large purchasers of palm oil. Oreo cookie maker Mondelez International Inc. accounts for 0.5% of palm oil consumption globally, according to its website.

In a video broadcast, Indonesia's President Joko Widodo said he wanted to ensure the availability of food products at home after global food inflation soared to a record high following Russia's invasion of major crop producer Ukraine.

"I will monitor and evaluate the implementation of this policy so availability of cooking oil in the domestic market becomes abundant and affordable," he said.

The announcement will hurt consumers in top buyer India and globally, said, Atul Chaturvedi, president of trade body the Solvent Extractors Association of India (SEA.)

"This move is rather unfortunate and totally unexpected," he said. Prices of alternative vegetable oils rose in response to the ban that will take effect on April 28. Soybean oil, the second most used vegetable oil, rose 4.5% to a record high of 83.21 cents per pound on the Chicago Board of Trade.

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