Indonesia, the world’s largest producer of palm oil, has announced plans to ban exports of the product, in a surprise move that could further contribute to surging global food inflation.
The ban on shipments of the world’s most widely-used vegetable oil, used in products ranging from food to cosmetics, could raise global food costs. Limited supply may also see governments having to choose between using vegetable oils in food or as biofuel. Indonesia is responsible for more than 50% of global palm oil supply.
Indonesia’s President Joko Widodo said the move was being made to ensure the availability of food products at home, with Russia’s invasion of Ukraine and the economic impacts sending global food inflation soaring to record highs.
The dramatic rise in the price of oil and gas in the wake of the military action, along with reduced grain exports from Ukraine, have been the primary forces driving food prices up.
“I will monitor and evaluate the implementation of this policy so availability of cooking oil in the domestic market becomes abundant and affordable,” Widodo said in a video announcement.
The price of alternative vegetable oils spiked in response to the announcement which will take effect from April 28th. Soybean oil, the second most popular vegetable oil, gained 4.5% to a record high of 83.21 cents per pound on the Chicago Board of Trade.
Global prices of crude palm oil have surged this year in light of poor harvests in Indonesia and Malaysia, coupled with previous moves by Indonesia to restrict exports which ended in March.
The move follows on from a similar decision by Argentina last month, who briefly halted new overseas sales of soy oil and meal to help keep domestic prices down.