A few weeks of posting Russia’s invasion to Ukraine, Indonesia decided to stop the export of cooking oil. Joko Widodo, the President of Indonesia announced that the country would stop the export of cooking oil and raw materials starting April 28. Indonesia is the largest palm oil producer in the world and India is the largest importer. Prices will take a walk after the suspension starts to act.
Why is palm oil Necessity?
Palm oil is an important element behind forming most of the things we need in our daily lives. Bread, biscuits, lipstick, detergent, soap, chocolate, moisturizer, and many more products are made using palm oil. India is very dependent on Indonesia and Malaysia to import oil and to meet the domestic needs of this Humungous population. According to Indian Solvent Extractors Association, India imports nearly 14 million tons of edible oils every year. Of this number of defeats, 8.5-9 million tons are palm oil. According to the report, Malaysia is a supplier of crude palm oil and crude palm kernel oil from November to March. On the other hand, Indonesia is a leading supplier of RBD Palmolein from November-March.
How does this export ban affect the price of cooking oil?
There is a major inflation in the market after the Russian invasion of Ukraine because these two countries are the leading producers and exporters of sunflower oil. As a result, the price of palm oil and soybean oil rose to an unbelievable level. Indonesian suspension will add more cooking oil prices. As a result, manufacturers will not have a choice except to receive it.
What does the data show?
According to data from Bloomberg, the price of palm oil increased by 57.9% last year. Such a large increase is only one year is the main reason to reduce the percentage of profits from the soap and biscuit industry. The maker must increase the price by 10-15% because the price of raw materials rises to 40-50%.
Atul Chaturvedi, President of the Indian Solvent Extractor Association, is quite confident that this Indonesian decision has a high risk of causing serious problems. The suspension will definitely increase the price of cooking oil very because there will be a lack of palm oil in the market. He also felt that there was doubt about how long Indonesia could stop this. According to Statista data, the country produced around 46.2 million tons of palm oil last year. Among these, only 20 million tons used for household needs and the rest are exported. Indonesia may face difficulties in dealing with large amounts of palm oil production.
