By Bernadette Christina

JAKARTA (Reuters) – Indonesian government officials told palm oil companies on Monday that an export ban announced late last week would cover shipments of refined, bleached, deodorized (RBD) palm olein but not crude palm oil, two industry sources told Reuters.

The trade ministry and the coordinating ministry were not available for comment immediately.

The announcement Friday by President Joko Widoso, that Indonesia was the largest palm oil producer in the world, shocked traders. He said the country would stop exporting the oil starting April 28 to make it more available for domestic consumption.

Although the exemption of crude palm oil will benefit global markets, most of Indonesia’s palm oil exports remain in the form processed oils.

Already, the global edible oil supply was already strained by bad weather and Russia’s invasion of Ukraine. Global consumers now have to spend top dollar for their supplies as global food inflation continues to rise to an unprecedented high.

Malaysian benchmark crude palm oil futures plunged 2.09% following news of a ban that does not apply to RBD olein. They had risen nearly 7% in the past six weeks.

Paramalingam Supramaniam director of Selangor-based brokerage Pelindung Bestari said that the massive shortage was overblown after learning about the ban which only includes olein bulked and packaged from Indonesia.

He expressed concern that crude palm oil, which is a raw material for RBD Palm Olein, would be included on the banned product list.

Refinitiv Eikon estimates that Indonesia’s average monthly RBD exports were approximately 620,000 tonnes in 2021. This compares to the average annual crude palm oil export of about 100,000 tonnes. Spain and Pakistan were top export destinations.

In Asia, the rupeeh led currency fell while government moves to lower stubbornly high cooking-oil prices caused shares of some of Indonesia’s largest palm oil producers to slump on Monday. The government of Indonesia issued dollar-denominated bonds that fell over 1 cent, their lowest level since the spring 2020 COVID market crash.

The data of Indonesia’s Palm Oil Association (GAPKI), showed that CPO exported in 2021 was 25.7 Million tonnes. That is 75% of all palm products exports. CPO exports made up 7.98% or 2.74million tonnes of total shipments in 2021.

CPO exported in January and February of this year were 3.38million tonnes (79%) while CPO exports were 99,000 tonnes (2%).

Due to increasing demand for palm oil which Indonesia uses to cook oil, global crude palm oil prices have reached historic heights. In addition to a weak supply from Indonesia and Malaysia as well as a January ban by Indonesia on palm oil exports, this was lifted in March.