Indonesia Bans Exports of Refined Palm Oil

On Friday, the government of Indonesia announced that it has decided to ban all exports of palm oil in order to ensure enough supply on the domestic market. The restriction doubles down on an earlier measure enacted in February, which required local producers to set aside 20 percent of their expected exports for domestic consumption.

On Monday, Indonesian officials backed down slightly and clarified that they would only halt exports of a highly-refined palm oil product, RBD palm olein. Crude palm oil exports may continue as before. 

The back-to-back announcements took markets by surprise, and edible-oil prices briefly surged. Indonesia is the world's biggest supplier of the world's most popular edible oil, and the news made it appear that it would be suddenly exiting the market - just two months after Ukrainian sunflower oil exports were shut down by a Russian blockade. 

Palm oil dominates the global trade in edible oils, and Indonesia produces nearly 60 percent of the world's palm oil supply. It exported 26 million tonnes of the product last year. The palm oil trade is highly concentrated in Southeast Asia: between them, Indonesia and neighboring Malaysia produce 90 percent of global palm oil production, according to agribusiness consultancy Gro Intelligence.

With concerns mounting of a tight global market in edible oils, Malaysian producers have called on importers of palm oil to refrain from turning it into biodiesel fuel. 

"Exporting countries and importing countries need to have their priorities right, this is the time to temporarily reconsider food versus fuel priorities," said the director general of the Malaysian Palm Oil Board, Ahmad Parveez Ghulam Kadir, speaking to Reuters. "It's very important for countries to ensure available oils and fats are used for food."