Indonesia: Cooking oil price still far above target needed to lift export ban

  • The price of cooking oil remains far above IDR14,000 per liter, a cap the government has said must be met in order for the palm oil export ban to be lifted.
  • Almost a week after the shipment of cooking oil and cooking oil materials – notably crude palm oil (CPO) – was suspended, the absence of a substantial decline in domestic market prices raises questions about the effectiveness of the ban.
  • The national average price of subsidized bulk cooking oil had dropped to IDR17,200 per liter on 4 May 22, Trade Ministry data show, which is down only 1.15% over the course of the week since the ban started, on 28 Apr 22.
  • However, the ministry data also show that bulk cooking oil was still sold at IDR18,491 per liter in Jakarta and even at prices surpassing IDR20,000 per liter in other major provinces, like Banten and West Java.
  • “So far, the export ban has not had any big effect [on the bulk cooking oil price],” Indonesian Vegetable Oil Refiners Association (GIMNI) executive director Sahat Sinaga told The Jakarta Post.
  • GIMNI’s Sahat went on to claim that current policies would be to little avail in bringing down the bulk cooking oil price.
  • He suggested the government involve the State Logistics Agency (Bulog) and state-owned staple food holding company FOOD ID to distribute the subsidized bulk cooking oil, and to give both firms fresh capital to ensure the success of the operation.
  • He estimated that the government would need to increase subsidized bulk cooking oil supply in the market to 250,000 tons in May 22 to bring down the price.
  • Increased and improved supervision of the distribution of cooking oil would also be vital, he said. “If we could flood the market properly, then, at the end of May 22, in my opinion, the target should be achieved and the export ban could be revoked by 1 Jun 22,” Sahat said.
  • Sahat urged the government to act fast, arguing that a prolonged export ban would hurt oil palm farmers. He said storage tanks would remain full, potentially leaving oil palm harvests to rot amid an inability to sell the stocks.
  • Meanwhile, he suggested, the government should increase the amount of CPO in biodiesel by mandating the use of B40 fuel instead of the current B30 requirement, arguing that that could be a solution both for farmers and in light of high oil prices.
  • Indonesian Market Traders Association (IKAPPI) chairman Abdullah Mansuri concurred, saying the CPO export ban had done little so far to lower the prices of either bulk or packaged cooking oil.
  • “In reality, we, traders, do not feel the impact of the export ban. In fact, bulk cooking oil – sold at the government’s price of IDR14,000 per liter – remains scarce,” Mansuri told the Post.
  • Similarly, the nonsubsidized packaged cooking oil, which is subject to market pricing, dropped only 2% over the past week to IDR23,300 per liter on 4 May 22.
  • Trade Ministry data show that prices in several regions of Sumatra and Kalimantan are seeing higher prices at between IDR24,000-IDR25,000 per liter.
  • “It is still far from our expectations,” Mansuri said. He added that traders were urging the government to come up with a better solution, one that should be discussed beforehand with CPO producers to avoid further policy miscalculations due to “one-sided decision-making”.
  • Executive Office of the President undersecretary Panutan Sakti Sulendrakusuma defended the export ban, arguing that the policy had shown some positive impact on the availability and price stability of cooking oil, albeit not yet significant.
  • “The [bulk cooking oil price] is on a sloping and falling trend,” Panutan said in a statement. He said the effect would become more apparent, saying: “It takes time to see the outcome. Moreover, the new policy has [only] been in effect for a week”.

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