Palm oil recession deepens after Indonesia lifts export embargo

Palm oil has lost a major support since the lifting of the ban on exports by top producers Indonesia, paving the way for further declines in prices as supply increases and demand declines.

The future was already low this week in anticipation that Indonesia’s sanctions would be short-lived, and late on Thursday President Joko Widodo said exports could resume from May 23. This is after considering internal supply and price improvements, as well as 17 million workers in the industry, he added.

On Tuesday, April, palm oil was loaded onto a truck from a tanker docked at the port of Tanjung Priok in Jakarta, Indonesia. 26, 2022.

Indonesia’s embargo, which took effect on April 28, has been one of the biggest acts of grain protection since Russia’s invasion of Ukraine, which has hampered exports of sunflower oil and exacerbated the global deficit. Palm oil is used in everything from food to soap to fuel, and Indonesia’s move has pushed prices even higher, although they have retreated due to weak demand from top buyers.

Tajgir Rahman, general manager of Savola Foods’ oil and wheat trading, said tropical oil could fall to 5,000 ringgit ($ 1,135) a tonne in July or August due to adequate supply in the market. “Demand for this specialty has grown significantly as a result of recent corporate scandals.”

Data from cargo surveyors show that despite the increase in overall shipments, Malaysia’s palm oil exports to India and China, the two largest importers, fell in the first half of May. High prices have dampened demand in both countries, and the situation in China has worsened due to severe cowardly lockdowns.

At 10 a.m. local time on Friday, the ministers may announce further steps to control domestic prices and supply of cooking oil.

Still, “the drama may not end here,” said Ho Leung, an RHB research analyst. Further policy changes could lead to savings, including raising the price of bulk oil, hiring an entity to ensure domestic supply, restoring high export tariffs or even domestic market obligation schemes with different parameters, he said in one. Note:

Kuala Lumpur futures fell 2.4% to 5,925 ringgit in the overnight session, the lowest intraday level since April 11, before trading at 6,052 ringgit at 10:48 am. If done and the resolution of the Ukraine war is 5,000 ringgit by June and 4,000 ringgit by September.

© 2022 Bloomberg

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