Indonesia’s restriction on palm oil exports will be lifted on Monday, according to the president,

According to the president, Indonesia’s restriction on palm oil exports will be lifted on Monday.

Following improvements in the domestic cooking oil supply situation, President Joko Widodo said on Thursday that Indonesia would suspend its palm oil export embargo on Monday, May 23.

Even though the price of bulk cooking oil has not yet reached the anticipated 14,000 rupiahs per litre, the government decided to relax the prohibition because the government is concerned about the well-being of 17 million palm oil workers, according to the news agency Reuters.

Indonesia, the world’s largest palm oil exporter, has blocked edible oil shipments since April 28 to flood the domestic market with supply to control rising cooking oil prices. 

According to reports, despite strict measures that have shaken the edible oil markets and cost hundreds of millions of dollars in lost revenue, the price of cooking oil, a staple for Indonesian families, has not decreased, lowering President Joko Widodo’s approval rating.

The president, known as Jokowi, previously stated that the need for affordable food superseded income considerations and that the export ban would only be repealed if domestic requirements were addressed.

Traders of palm oil have speculated that the prohibition may have been lifted partly, particularly in recent developments.

According to a poll conducted this week by pollster Indikator Politik Indonesia, the president’s approval rating is at a six-year low, primarily due to rising cooking oil prices and inflationary impacts.

From May 23, Indonesia will abolish its ban on palm oil exports.

The restriction on palm oil exports, which was enforced three weeks ago to enhance the domestic cooking oil supply, will be lifted on Monday, May 23, according to Indonesian President Joko Widodo, during a virtual address to the country.

Although bulk prices have not yet fallen to the anticipated 14,000 rupiahs per litre, the supply of bulk cooking oil has reached a “level greater than needed,” according to the president.

“I realise cooking oil costs are still relatively high in various locations,” Widodo told Reuters, “but I expect they will be more cheap in the next weeks.”

Indonesia, the world’s top palm oil producer, has banned the export of crude palm oil (CPO) and other derivative products since April 28 to bring domestic cooking oil prices down.

Several importing countries saw an increase in cooking oil prices due to the decision.

Members of Indonesia’s parliamentary budget committee encouraged the government to “review the CPO export prohibition” during a session with Finance Minister Sri Mulyani Indrawati. However, they did not go into depth about the policy.

Sri Mulyani said she would bring their proposal to President Joko Widodo’s attention, noting that the government is aware that the export prohibition will result in a monthly revenue loss of 6 trillion rupiahs ($407.33 million).

Meanwhile, suppose the export prohibition is not lifted by the end of the month. According to Sahat Sinaga, executive director of the Indonesia Vegetable Oil Industry Association, the palm oil sector may be forced to shut down.

“If there are no exports by the end of May, everything will be blocked, and all the tanks will be full,” Sahat said.

Indonesia has a storage capacity of roughly 6 million tonnes, including at ports, and domestic inventories had reached around 5.8 million tonnes by early May, according to Sahat.

Domestic stockpiles grew to 5.68 million tonnes at the end of March, up from 5.05 million tonnes a month earlier, according to figures released on Thursday by the Indonesia Palm Oil Association (GAPKI).

Indonesia consumes only about 35% of its palm oil production, primarily for food and fuel.

Eddy Martono, GAPKI’s secretary-general, claimed several enterprises had already stopped buying palm fruits outside their farms and were reducing their crops.

The embargo was implemented when palm fruit output was generally high, according to Sahat. However, due to the export ban, just half of the fruit will be consumed, costing farmers 17 trillion rupiah ($1.15 billion).

Hundreds of palm oil farmers rallied in multiple locations to protest declining salaries.

According to Irfan, a local palm oil farmer, for the past two days, trucks piled high with palm fruits have been stopped in a long line outside a palm oil factory in West Sulawesi.

He claimed that farmers bypass intermediaries and bring palm fruits directly to mills to avoid further losses.

“However, because the mill prioritises their partners, the number of non-partner farmers is increasing.”

Experts advise investors to take advantage of Indonesia’s oil prohibition.

Investors are being urged to boost palm oil production with funding to take advantage of the Indonesian government’s recent prohibition on exporting oil palm and oil palm derivatives.

Uwadiale Agenmonmen, the Managing Director and Chief Executive Officer of Randal Farms Limited, revealed this while leading a group of investors to the company’s farm in Iguemokhuwa village in Edo State’s Orhionmwon Local Government Area.

According to him, the prohibition has increased the pressure on Nigerian palm oil farmers, creating an opportunity for the country to expand palm oil planting and output.

Agenmonmen told journalists shortly after the investors’ visit to the farm that money remains the company’s biggest hurdle, stressing that the farm required N2 billion to finish its current development plan.

“It is time for investors to boost palm oil production with capital in order to take advantage of the Indonesian government’s recent prohibition on the export of oil palm and oil palm goods,” he said. The business climate is fascinating. It may have its ups and downs, but the palm oil value chain has recently risen, buoyed by Indonesia’s recent decision to halt exports, putting pressure on Nigeria.

“Because people who regularly buy palm oil and other items from Indonesia can no longer do so, prices are rising, which is beneficial for farmers who cultivate and sell products.” So far, the business climate is favourable.”

He claimed that the Nigerian Central Bank had allocated cash to help the industry but that they had to go via commercial banks, which determined the terms.

According to him, the farm covers 1,509 hectares of land, of which 700 hectares are already farmed, and another 500 hectares will be cultivated this year.

According to Agenmonmen, the farm’s mill can currently generate 16 tonnes of red oil per day, and it can create 27 tonnes of palm kernel oil per day when raw materials are in stock.

“We need to bring our current investors and bankers here to see what we’re doing in person because there’s a difference between talking to people about what we’re doing on paper and over the phone; we want to connect in real-time to where their money is, and with that, we expect better business opportunities.” We need to raise the excess of N2 billion to plant what we have left and continue development.”

The restriction on palm oil in Indonesia has harmed the most Indonesians.

Export restrictions have backfired on local farmers. For the past few weeks, the scarcity of palm oil has been making headlines. To solve shortages, Indonesia, the world’s top exporter of palm oil, halted shipments of the extensively used cooking oil on April 28. This came after the country imposed an embargo on coal exports in January to maintain supply for local power plants, causing coal prices to skyrocket from $148 at the end of 2021 to $223 by January 25.

Experts questioned the decision to suspend exporting both items as a strategy to alleviate shortages, even if the coal restriction was overturned at the beginning of February. “Did the issues disappear?” According to Bhima Yudhistira Adhinegara, director of the Jakarta-based Center of Economic and Law Studies. “Rather, potential customers from other countries objected. These policies must be put to an end.”

Hundreds of Indonesian farmers have protested as palm fruit prices have plummeted, while competitor palm oil producer Malaysia has taken advantage of the opportunity to gain market dominance. However, this latest conflict is merely one chapter in the tainted history of this cooking oil.

Palm oil has been linked to the trans-Atlantic slave trade, colonialism, and environmental damage since the 16th century.

Removing the oil from the fruit

Palm oil is extracted by pressing the fruit or stone of the Elaeis guineensis palm tree. The oil has a long shelf life since it remains semi-solid and spreadable at room temperature. It’s currently in around half of all packaged foods in the United States, including ice cream, quick noodles, and other snacks.

The oil is also used in beauty goods such as soap, shampoo, and lipstick since it cleanses and hydrates the skin and does not melt readily.

The palm oil narrative

Palm oil was first shipped and traded in the 1500s, but by the 1900s, demand had exploded due to the introduction of palm-oil-based margarine. Plantations were used to mass-produce palm oil, and working conditions were frequently oppressive, coercive, and even violent—states that have lasted into the present day.

Following WWII, Indonesia and Malaysia gained independence from the United Kingdom, relying mainly on the sale of palm oil. Tallow and lard, primarily obtained from pigs, became a competitor to palm oil in the 1960s.

In the decades that followed, demand fell as health worries about saturated fats grew, writes Jonathan E. Robins, an associate professor of world history at Michigan Technological University, in a Conversation post. However, by the 1990s, initiatives to ban trans fats, which are naturally found in the stomachs of ruminant animals, had reopened the way for palm oil as a “cheap and effective substitute” for artificial trans fats, according to Robins. Palm oil production quadrupled between 1995 and 2015, with Malaysia and Indonesia accounting for 85% of the total.

Palm oil is fraught with environmental and ethical concerns. According to the World Wildlife Fund, converting tropical forests to palm oil plantations has resulted in many issues, including habitat loss for endangered species, increased air pollution from forest fires, water pollution from pesticides and fertilisers, increased soil erosion, and the failure of critical carbon sinks.

The European Union established aims to phase out palm oil biofuel use by 2030, citing these environmental consequences. Palm oil has been eliminated from some goods by some corporations. However, change does not always stick: Iceland, a UK-based food retailer, had stopped using palm oil until recently when the Ukraine crisis disrupted supply lines.

However, some organisations, such as the International Union for Conservation of Nature (IUCN), have claimed that boycotts could cause even more significant harm. Although palm oil farming threatens biodiversity and animals such as orangutans, gibbons, and tigers, according to a 2018 IUCN report, switching to rapeseed, soy, or sunflower farms could result in even more biodiversity loss and deforestation.

“There are no simple solutions when you consider the terrible implications of palm oil on biodiversity from a global viewpoint,” IUCN Director General Inger Andersen remarked in 2018. “Palm oil is used in food by half of the world’s population, and if we restrict or boycott it, other, more land-hungry oils will certainly take its place.” Palm oil is here to stay. We urgently need coordinated effort to make it more sustainable, ensuring that all parties–governments, farmers, and the supply chain–stick to their sustainability obligations.”

What Indonesia’s prohibition meant in practice

Despite concerns about palm oil’s sustainability, the prohibition has little to do with the environment—instead, surging demand and oil shortages pushed prices out of reach for Indonesian consumers.

Unlike many Americans and other Westerners, who may only use oil as a component in a product, oil is essential for everyday cooking in Indonesia, whether feeding a family or running a business.

Local farmers have been hit much harder by the prohibition. “The impact of the export prohibition on small scale farmers has been great because many of them have no other sources of income,” Mansuetus Darto, president of the Indonesian Oil Palm Farmers’ Union in West Java, told Al Jazeera. According to Darto, the prohibition exacerbates economic difficulties that began with COVID-19. “So many farmers have struggled recently, particularly in the last two.” They believed that things were starting to improve following the pandemic, but if there are local or global political issues, they will be affected.”

There is no simple solution to the problem of palm oil production. Cutting off exports from a specific country, whether oil or fossil fuels, does not solve these complex issues. It frequently puts individuals who are hurting in an even more difficult position.

Indian edible oil importers would have faced the “ugly” supply shortage if Indonesia’s prohibition had continued.

If top producer Indonesia continues its restriction on palm oil exports to suit domestic demand, Indian vegetable oil importers foresee an “ugly” supply shortage.

Due to the Ukraine-Russia war affecting supplies of sunflower oil, the problem has become more significant for India, the world’s largest importer of edible oils.

To keep domestic cooking oil prices down, Indonesia banned palm oil exports this month, putting India more reliant on Malaysia, the world’s second-largest producer.

According to the Mumbai-based Solvent Extractors’ Association of India, India imported 1.78 million tonnes of palm oil from Malaysia between November and April, followed by 1.15 million tonnes from Indonesia (SEA).

According to the trade organisation, the Indonesian restriction may be overturned by the end of May, but the “situation may become ugly” if Indonesia continues to prohibit the export of palm oil products since sufficient supply from other sources is unavailable.

According to the trade organisation, the Indonesian restriction may be overturned by the end of May, but the “situation may become ugly” if Indonesia continues to prohibit the export of palm oil products since sufficient supply from other sources is unavailable.

By purchasing other edible oils, India has attempted to compensate for the gap caused by the Indonesian ban and the Ukraine conflict.

According to SEA, sunflower oil demand has decreased due to high worldwide pricing and limited supply, with no shipments from Ukraine since March 27.

In April, India’s total edible oil imports plummeted 14.4% to 900,085 tonnes, compared to March’s amount.

In April, palm oil imports totalled 572,508 tonnes, accounting for 64% of edible vegetable oil purchases.

According to the organisation, India imported 313,859 tons of palm oil from Malaysia last month, consisting of 277,024 tons of crude palm oil and 28,835 tonnes of refined, bleached, and deodorised palm olein, and 8,000 tonnes of oil palm kernel oil.