Bernadette Christine and Rajendra Jadhav

JAKARTA/MUMBAI – Indonesia’s ban of palm oil exports from Indonesia is likely to be temporary as Jakarta does not have sufficient infrastructure and buyers are pressing Indonesia to resume shipments.

In shock news, the world’s largest palm oil exporter declared plans to stop exports Friday. This move caused a spike in edible oil prices and created confusion among consumers and palm oil producers alike.

The ban on exports of palm oil olein (RBD), which will start on Thursday, was lifted by officials. It would not impact crude palm oil flows or any other derivative products.

According to Monday’s presentation, Jakarta said that it will increase the ban “if there are shortages of refined palm oils.”

Analysts estimate that RBD Palm Olein is responsible for 40% to 60% of Indonesia’s palm oil product exports.

There are concerns among Indonesian palm oil processors and producers that further restrictions could be implemented. They typically export twice the amount of palm oil than is used domestically.

“Based on simple calculation, even before one month, all the tanks would be full if it’s a total ban,” said Eddy Martono, secretary general of GAPKI, Indonesia’s biggest palm oil association.

Martono explained to Reuters that once tanks are full, the mills cannot process fresh fruit bunches. This would cause production to fall and lead to rot.

A global trading company based in Singapore said that Indonesia has approximately 5 million tonnes of oil palm stocks and its storage capacity of 6-7 million tonnes will soon be used up.

Indonesia consumes approximately 1.5 million tonnes and produces 4,000,000 tonnes each month of palm oil.

GAPKI estimates that Indonesia will consume 18.4 Million tonnes of palm oil in 2021 from a total of 51.3million tonnes.

Carolyn Lim, Senior Manager Corporate Communications at Musim Mas (a Palm Oil Producer with Plantations in North Sumatra), stated that the ban could be too restrictive for the market, especially the smallholders.

Musim Mas predicted that the ban might last several months instead of just a few days if it was extended to a larger range of palm oil products.

Prices for fresh fruit bunches have dropped between 400 and 1000 rupiah/kg since the announcement. They were previously at 3,700-3,900/kg, Mansuetus Darto (secretary general of Indonesia’s Oil Palm Farmers Union) stated in a statement.

The ban was a decision made by politicians to help consumers. A Mumbai-based vegetable oil dealer and global trader said that if it is kept for longer, farmers would be affected.

Indonesian buyers of palm oil from Indonesia have raised concerns about Jakarta’s export policy and they will request Jakarta to reconsider the matter, stated Rasheed JanMohd (chairman of Pakistan Edible oil Refiners Association, PEORA).

It’s high time that Indonesia reduces palm oil use for biodiesel, and lifts the ban. JanMohd indicated that Indonesia will continue to ban palm oil and would request the Pakistan government speak with the Indonesian government in order to get supplies restored.

India, which is the biggest importer of palm oil in the world, requested that Indonesia increase its supply.