Will India’s demand for Malaysia’s palm oil dip after Indonesia export ban reversal?
- Indonesia, the world’s largest producer of palm oil, recently overturned a ban on exporting the commodity as the government tried to curb domestic prices
- India, the world’s biggest buyer of palm oil, previously bought two thirds of its supplies from Indonesia but started to buy more from Malaysia after the ban
Indonesia’s resumption of palm oil exports will not blunt Malaysia’s competitiveness in exporting the edible oil, the Malaysian commodities minister said on Sunday, pointing to the rival’s loss of sales in India.
Minister Zuraida Kamaruddin urged “all Malaysian oil palm growers – both plantation firms and smallholders alike – not to be unduly concerned with the recent development.”
Indonesia is the largest producer of palm oil, with Malaysia second. Prices of all kinds of edible oils have hit record highs this year because the war in Ukraine has disrupted supply of one of them, sunflower oil.
Alarmed by a rise in domestic cooking oil prices, Jakarta on April 28 banned exports of palm oil, but said on Thursday the ban would end on May 23. Then on Friday, the Indonesian government said producers would still have to sell enough locally to maintain a domestic stock of 10 million tonnes.
India, traditionally getting two-thirds of its palm oil from Indonesia, has been forced to buy more from Malaysia and Thailand, while other frustrated importers have said they would decrease reliance on unpredictable Indonesian supplies.
“Indonesia’s policies could well work to Malaysia’s advantage …,” said Zuraida, the minister for plantation industries and commodities. Indonesia’s export control policies “would enable [Malaysia] to emerge a dominant supplier to India,” she said.
Her statement was headed: “Malaysia will not lose competitive edge as Indonesia resumes palm oil export”.
Zuraida said her ministry did not expect a big downward adjustment to crude palm oil prices following Indonesia’s latest policy announcements.
Prices would remain at elevated levels due to uncertainties in the production of major oilseeds as a result of geopolitical tensions and unfavourable weather, she added.
Zuraida’s ministry is talking to the finance ministry about a proposal to temporarily cut an export tax on crude palm oil by as much as half to help fill the global shortage of edible oil and boost Malaysia’s market share, she told Reuters in an interview last week.