On the evening of April 22, Indonesian President Widodo, the world’s largest palm oil producer, announced that it would stop exporting “all edible oil and palm oil raw materials” from April 28.
Indonesia’s new policy immediately caused a huge shock in the global food oil market, and the prices of international oils and fats rose sharply. Among them, the price of soybean oil futures on the Chicago Mercantile Exchange (CBOT) soared, hitting an all-time high of 83.21 cents, which led to a sharp rise in the prices of the three major domestic oils and fats. Statistics show that international soybean oil prices have risen by nearly 50% this year, while palm oil prices have risen by nearly 40%.
It is worth noting that in the first quarter of this year, palm oil from Indonesia accounted for 52% of domestic imports. Domestic edible oil prices may further increase due to export restrictions in Indonesia. Over the past year or so, the price increase of domestic edible oil has been much lower than that of the international market.
Facing the rising pressure of edible oil prices in the international market, the domestic futures market is also expanding the risk management toolbox for oil varieties, providing new channels for companies to avoid market risks. On April 21, DCE issued an announcement to openly solicit opinions from the market on soybean No. 1, soybean No. 2 and soybean oil futures option contracts, which will end on April 28. Listing is not far off.
Indonesia announces ban on export of palm oil, global vegetable oil prices hit record highs
On April 22, Indonesian President Widodo announced that from April 28, the export ban on edible oil and palm oil raw materials will be implemented.
Palm oil is often used to produce edible oils, processed foods and even commodities such as cosmetics and biofuels. Indonesia is the world’s largest palm oil producer, accounting for more than half of global supplies. China and India are the main importers of Indonesian palm oil.
As early as October 2021, Indonesian President Widodo said that Indonesia would stop exporting crude palm oil “at some point” in the future. Indonesia, a major coal exporter, ordered a ban on coal exports earlier this year, causing global coal prices to soar.
On January 27 this year, Indonesia introduced the Domestic Market Obligation (DMO) policy, requiring palm oil exporters to sell 20% of their planned exports domestically; on March 9, this ratio was raised to 30%. On March 17, Indonesia cancelled the DMO policy and increased export fees instead.
Indonesia’s new policy immediately caused a huge shock in the global food oil market. In the evening of the 22nd, U.S. soybean oil futures quickly rushed to a record high. Soybean oil futures on the Chicago Mercantile Exchange (CBOT) soared, with the benchmark at one point rising about 4.5% during the session to an all-time high of 83.21 cents. After the domestic night market opened, the three major oils and fats rose across the board. Palm oil once rose by more than 7%, and soybean oil and rapeseed oil rose by more than 3%.
Since the beginning of this year, the global vegetable oil price has continued to soar. The US soybean oil price has risen by nearly 50%, while the international palm oil price has risen by nearly 40%. Previously, data released by the United Nations Food and Agriculture Organization on April 8 showed that the vegetable oil price index increased by 23.2% month-on-month in March, due to the rise in sunflower oil quotations, and Ukraine is the world’s major exporter of sunflower oil.
“Rising sunflower oil and crude oil prices also led to sharp increases in palm oil, soybean oil, and rapeseed oil, with concerns over reduced exports from South America providing further support for soybean oil prices.” The Food and Agriculture Organization of the United Nations said Ukraine is in the Black Sea. The regional sunflower oil production accounts for 60% of the world’s total, and its export volume accounts for 76% of the world’s total.