Indonesia will impose local sales rules if palm oil exports resume

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JAKARTA – Indonesia will impose domestic sales requirements for palm oil to boost domestic supply of cooking oil when the world’s largest producer of edible oil resumes exports next week, the country’s economy minister said on Friday.

President Joko Widodo has announced that Indonesia will lift its export embargo from Monday, following the imposition of an April 28 policy to control high domestic cooking oil prices.

The government has decided to lift the ban despite the fact that the price of bulk cooking oil has not yet reached the target of Rs 14,000 ($ 0.9550) per liter.

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Djokovic, known as the president, said he hoped the price of cooking oil would ease towards the target and promised that the authorities would closely monitor the supply situation.

Indonesia will impose a so-called Domestic Market Obligation (DMO) on palm oil to ensure that 10 million tonnes of cooking oil is kept at home, Economic Affairs Coordinating Minister Erlanga Hartarto said in a virtual briefing.

“The Ministry of Commerce will determine the size of the DMO filled by each producer and the method of producing and distributing cooking oil in the communities,” he said.

The state food procurement agency, Boulogne, will be hired to set up a cooking oil buffer stock, Airlanga said.

The introduction of export bans shocked the world edible oil market. Used in everything from palm oil, margarine to frying fats and shampoos, comprising one-third of the world’s vegetable oil market, Indonesia supplies about 60%.

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Palm oil futures rebound

Wong Chi Ting, an analyst at Maybank, said international crude palm oil prices were expected to fall after the decision to lift the embargo.

“For international buyers, the availability of Indonesian palm oil will put some pressure on international CPO (crude palm oil) prices. Overall, the lifting of the export ban is a relief for Indonesian-based farmers, “Aung said in a note addressed to clients.

Indonesian farmers have protested against export bans this week.

The domestic price of palm fruit has dropped by almost 70% since the ban, said Gulat Manurong, chairman of the Indonesian small owners group APKASINDO, in a statement, welcoming the move to resume exports.

“The export embargo has shown Indonesia how important palm oil is to the country,” Gulat said.

Malaysia’s benchmark palm oil contract fell 1.61% in early trade on Friday, before the market rose more than 3% as it digested news of the need for internal sales.

Meanwhile, the Indonesian rupiah strengthened by 0.47% and the Jakarta stock index rose nearly 1.5%. ($ 1 = Rs. 14,660.0000)

(Reporting by Francisca Nangoy, edited by Bernadette Christina Munthe Ed Davis)

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