INDONESIA lifting the palm oil ban will not have a severe effect on crude palm oil (CPO) prices, Zuraida Kamaruddin said today.

The plantation industries and commodities minister said the ban was always meant to be temporary and that plantation firms and smallholders need not be too concerned about Indonesia’s move.

“While a knee-jerk correction in palm oil price is inevitable given such a move will somehow ease concerns over vegetable oil supply, MPIC (Plantation Industries and Commodities Ministry) does not expect a big downward adjustment to CPO prices as the market is well aware that this ban was always going to be temporary,” she said in a statement today.

Having said that, given that the export of other vegetable oils such as soybean, corn, rapeseed and sunflower has been affected by the ongoing war in Ukraine and the closure of Black Sea ports, Zuraida said CPO prices are likely to remain high.

Despite the lifting of the Indonesian ban, Zuraida said Malaysian growers stand to benefit the most.

“Market analysts expect Malaysian planters to be the largest winners on the long run as they are able to sell their CPO at high spot prices, which should translate into higher profit margin in 2Q 2022 coupled with higher production year-on-year and quarter-on-quarter.”

Zuraida said that Indonesia’s export policies might in fact also work in Malaysia’s favour, especially to increase its market share in India.

“The combination of Malaysia’s lower export taxes and the Indonesian ban may mean Indonesia’s share of palm oil exports to India will fall to 35% in the current marketing year ending on October 31 from more than 75% a decade ago, according to an estimate from the Solvent Extractors’ Association of India, a vegetable oil trade body,” she said.

India is the world’s top buyer of edible oil. In the first five months of 2021/2022, it bought 1.47 million tonnes of Malaysian palm oil compared to 982,123 tonnes from Indonesia.

“Trader estimates for May show India imported around 570,000 tonnes of palm oil with 290,000 from Malaysia and 240,000 from Indonesia.”

Indonesia will lift the ban on palm oil exports on May 23.

President Joko Widodo said the decision was made based on the current supply and price of cooking oil and in consideration of the 17 million workers employed in the Indonesian palm oil industry.

Indonesia accounts for nearly 60% of global palm oil production. It banned exports late last month in a bid to maintain domestic supplies and keep prices of its staple cooking oil down.

The ban sent Malaysian CPO prices soaring between February and April. – May 22, 2022.