By Rajendra Jadhav

MUMBAI, (Reuters) – Global edible oil buyers are forced to fork out top dollar after Indonesian’s unexpected palm oil export ban. This was in response to a shortage of oil due to bad weather and Russia’s invasion.

Industry watchers expect that the decision by the largest palm oil producer in the world to prohibit exports starting Thursday will raise prices for all major edible oils, including sunflower oil, palm oil and rapeseed. The increased fuel and food costs will cause additional stress to cost-sensitive customers in Asia and Africa.

James Fry of LMC International commodities consulting, stated that Indonesia’s decision had an impact on vegetable oil availability worldwide.

Nearly 60% of world vegetable oil shipments are made from palm oil. Top producer Indonesia exports around one third of the total vegetable oil. In an effort to reduce rising prices, it announced an export ban that will remain in effect until further notice on April 22nd.

Fry stated that this is because the oil exports to all major oil countries are in pressure. He cited three reasons: droughts in South America, rapeseed oil from Canada’s disastrous canola crop failures and sunflower oil as a result of Russia’s war against Ukraine.

The factors that have caused vegetable oil prices to rise by more than half in six months include labour shortages and droughts in Canada and Malaysia, which are the largest exporters of soybean oil and canola oil.

GRAPHIC-Global edible oil prices scale record highs after every major oil suffers supply setbacks (https://fingfx.thomsonreuters.com/gfx/ce/gdpzyawzovw/GlobalVegOilsApril2022.png)

The tightness was anticipated by buyers who hoped that a large sunflower crop from Ukraine, a top exporter of the commodity would help ease it. However supplies have stopped from Kyiv due to Russia’s “special operation”.

The importers had been relying on palm oil to cover the shortage until Indonesia’s surprise ban, which Atul Chaturvedi of Solvent Extractors Association of India, (SEA) stated.

NO EXCEPTIONS

India, Bangladesh, and Pakistan are all looking to boost palm oil imports from Malaysia. However, the second largest palm oil producer in the world cannot replace Indonesia’s, Chaturvedi stated.

India typically imports nearly half of its total palm oil supplies from Indonesia. Bangladesh and Pakistan, however, import almost 80% of their palm oils from Indonesia.

The loss of Indonesian oil palm can’t be compensated. “Every country will suffer,” stated Rasheed JanMohd (chairman of the Pakistan Edible oil Refiners Association, PEORA).

GRAPHIC-Key global edible oil statistics (https://fingfx.thomsonreuters.com/gfx/ce/qmypmeaeopr/EdibleOilStats.png)

The record-breaking February prices for vegetable oils rose because of disruptions in sunflower oil supply from the Black Sea.

Oil refiners were required to have working capital in order to meet rising prices. They had lower inventories in preparation for a fall in oil prices.

All oil prices, however, have risen further.

“Refiners were caught in the wrong place. They can’t wait for more than a couple of weeks. “They have to purchase plants to run them,” said the dealer.

A refiner in Dhaka said that Indonesia, which allowed loading from April 28 to May 28, will supply enough supplies for the first two-thirds of May. But, there could be shortages at the end.

Because they have limited oil supplies, South Asian refiners won’t release their crude into the marketplace at a rapid pace.

India is the biggest importer of vegetable oil in the world. As a result, palm oil prices soared by almost 5% in India over the weekend. This was due to shortages expected in the next months. In Bangladesh and Pakistan, the prices also rose.