Indonesia, the world’s biggest exporter of edible oils, will tighten its control over shipments in a sign of growing protectionism around the world as countries grapple with soaring food prices.
Palm oil exporters will have to allocate 30% of their shipment volume for the local market, an increase from 20%, according to Trade Minister Muhammad Lutfi. The government will take firm action on hoarders, he said Wednesday.
Governments are taking steps to safeguard domestic food supplies after Russia’s invasion of Ukraine roiled trade and sent prices of key staples skyrocketing. Protectionist measures, which have already picked up in recent years as the Covid-19 pandemic spurred concerns about shortages, could spell more bad news for global food trade and add pressure to food inflation.
The move by Indonesia comes as vegetable oil prices have surged over the past year due to a supply crunch, with palm, soybean oil and canola repeatedly hitting new highs. Russia’s invasion of Ukraine dealt a fresh blow as the conflict locked out exports from the two nations that ship about 80% of sunflower oil cargoes and more than a quarter of global wheat supplies.
Indonesia’s policy is aimed at ensuring affordable cooking oil for domestic consumers and will remain in place until supply returns to normal, according to Lutfi. There’s a possibility the allocation will be raised further if the situation doesn’t improve, he said. The latest rule will take effect Thursday.
Palm oil prices jumped, with futures in Malaysia rising as much as 13% to a fresh record while the Chinese contract in Dalian climbed by the daily limit. Rival soybean oil also advanced to an all-time high in Chicago.
“The increase in the domestic market obligation caught everybody by surprise,” Togar Sitanggang, vice chairman of Indonesian Palm Oil Association, said at a conference in Kuala Lumpur. “We strongly ask the government that any major changes only take place after Ramadan.”
Ramadan, a Muslim holy month marked by fasting from dawn and feasting at dusk, begins in early April and is followed by Eid al-Fitr in May. These events, celebrated by Muslims around the world, typically drive up demand for palm oil and other vegetable oils that are used to make treats like biryani and sweets.
Other countries that have taken to food protectionism include Hungary, which is banning grain exports. Argentina and Turkey also made recent moves to boost their control over local products. Moldova, albeit a small shipper, has temporarily halted exports of wheat, corn and sugar.
