Indonesia will ban the export of Crude Palm Oil (CPO) today in a bid to stimulate the domestic economy while attempting to control a global shortage.
Global CPO trade has seen a recent shift in supply following unprecedented global weather conditions, COVID-19 labor issues and the devolving situation in Europe halting Ukrainian raw produce exports.
Indonesia is the world’s leading edible oil exporter, producing 56% of global CPO. India imports half its total CPO consumption from Indonesia, and Indonesian CPO makes up close to 80% of Pakistan and Bangladesh’s total supply. China also relies on the Indonesian crude palm oil to fill their vegetable oil supply gap. March this year saw edible oil base prices escalate on the global market as pressures increased following scarcity of reserves.
With Indonesia cancelling the export indefinitely, expect Malaysia—who produces 31% of global supply—to increase its market share. Although, Malaysia’s current output cannot effectively fill the gap in production while demand and prices continue to rise. Expect Indonesia to concentrate on prioritizing domestic CPO reserves instead of relying on trade in order to reduce the pressure of internal supply shock. More so, perceptions of Indonesia and its export industry may negatively develop alongside the CPO trade barrier.
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Joseph is a Current Developments Analyst with regional expertise in Northeast Asia. He focuses primarily on South Korean-Japanese geopolitics.