Bernadette Christina and Fransiska Nanangoy

JAKARTA (Reuters). -Indonesia is expected to be able solve its cooking oil crisis in the next weeks, and also lift the May ban on palm oil exports, an industry body stated on Thursday. It came a day following a surprise policy decision that sparked even more concern for markets.

In an effort to reduce prices and secure supply, the world’s largest palm oil producer extended an export ban for raw materials used in cooking oil. It was put into effect Wednesday night at midnight.

Sahat Sinaga (a senior official with the Indonesian Palm Oil Board) stated that the decision shocked the industry but that he believed the supply problem could be solved soon after Eid al-Fitr, a Muslim holiday in May.

He stated that the palm oil export goal of 34,000,000 tonnes by 2022 will be achieved.

Veri Angrijono, Trade Ministry Senior Official, said when asked how the timeline was suggested by palm oil board that they “all hope” it can be resolved quickly.

According to a regulation from the trade ministry, Wednesday’s export policy review will take place monthly or whenever necessary. However, Chief Economics Minister Airlangga hartarto stated it can be lifted if bulk cooking oils fall below 14,000 Rupiah ($0.97) per unit nationwide.

The litre was purchased in Jakarta’s market for around 19,000 to 22,000 rupiah.

Sinaga explained that prices have been unable to be controlled in the past due to supply and distribution shortages, however he is confident about Bulog’s assignment to oversee distribution.

It will be great. It won’t be long. It won’t take long for the market to flood, he stated.

After Indonesia’s chief economist said Tuesday that the ban will only apply to refined, dyed, deodorized (RBD palm olein), markets responded with relief. However, authorities revealed that they would include other products in the ban announcement.

This had an immediate effect on vegetable oil prices worldwide, with palm oil futures rising by 9.8% in Malaysia. As the ban went into effect, the jitters spread to markets.

Muhammad Lutfi, Trade Minister, said that the decision came after thorough consideration. He also noted that he monitors daily cooking oil supplies.

Lutfi declared, “I wish we all understand how urgent this policy is.”

GAPKI, a palm oil association, stated that it was working closely with the government in order to supply affordable cooking oil. But they asked authorities to not impose an extensive and damaging ban on exports of palm oil.

‘VERY Negative Impact’

GAPKI released a statement saying that an export ban of CPO (and all of its derivatives) would not only have negative effects on refinery and plantation companies but will also impact millions of smallholders.

The Indonesian navy announced Thursday that it had seized two tanks containing crude palm oil and palm olein, as well as methanol, to demonstrate its determination to enforce the ban. This was a demonstration of Indonesia’s resolve.

MT World Progress was traveling towards India carrying 34.854.3 tonnes (palm olein) while MT Annabelle was bound to the United Arab Emirates with 13.357.4 tons of crude palm oil as well as 98 barrels methanol.

Four industry representatives told Reuters that the ban had trapped around 290,000.00 tonnes of edible oil intended to reach India through Indonesian ports or oil mills.

On Thursday, shares in Indonesian palm oil firms fell while concerns over the ban drove the rupee to its lowest level since July 2021. Riau provincial small farmers reported that palm fruit prices were already declining.

Radhika Rao (senior economist with DBS Bank) stated that exports could be impacted and this would negatively impact Indonesian earnings. It also affects the current account. Radhika said that it will “dampen sentiment about the rupiah”.

Joko Widodo, President of Indonesia on Wednesday stated that people need affordable food is more important than revenue concerns right now.

According to an independent survey, his approval rating rose slightly after the ban. It was conducted from April 20-25.

Sandri (42), a food seller, stated that he is struggling but support the president’s decision to lower cooking oil prices.

The government claims that oil prices on the markets are down, and it’s made me feel heavy. Sandri explained that it is still the same and there are no drops.

($1 = 14,460.0000 rupiah)