China braces for ban by Indonesia on exports of palm oil

Indonesia has announced a ban on exports of palm oil, the most widely used vegetable oil, further raising global edible oil prices amid inflation due to the Russia- Ukraine conflict. Industry insiders said on Sunday that as the world’s secondlargest palm oil importer, China may face shortterm supply difficulties if the ban continues.

Shanghai- based grain wholesale and retail industry insider Chen Hao said on Sunday that palm oil is the world’s most consumed edible oil in industry with the highest trade volume.

“Domestic prices for soybean oil, peanut oil and colza oil will rise because even though overall demand remains normal, palm oil, a major source of supply, is declining,” said Chen.

China imported 258,300 tons of palm oil from Indonesia and 242,800 tons from Malaysia in the first quarter of 2022, accounting for about 52 percent and 48 percent of China’s total import, respectively, according to Chinese commodities trading information site mysteel. com.

Indonesia’s President Joko Widodo said the ban was issued to secure domestic food supplies as two large grain exporters, Russia and Ukraine, are locked in conflict. In October 2021, Widodo announced that exports of raw palm oil might be banned at “some time in the future.”

Jiao Shanwei, editor- in- chief of cngrain. com, said that the impact of the ban on China’s edible oil prices will be obvious in the short term, and costs will surge for downstream users such as food production and processing.

But “the normal operations of China- Russia trade in colza oil, and peanuts imported from the US under bilateral trade agreements, may ease the current tension,” Jiao noted.

To secure the country’s food security, Northeast China’s Heilongjiang Province announced on Saturday that the province planned to enlarge the planting area of peanuts to exceed 10 million mu ( 666,666.67 hectares), increasing output by 2.6 billion jin ( 1.3 billion tons) in 2022.

“The gap of palm oil supply will definitely increase the demand for peanuts,” Chen noted. “Relevant authorities such as China Grain Reserves will release peanut reserves if the price rockets out of the market’s acceptability.”

“Aside from securing supplies at home, Indonesia also aims to cement its global position as an exporter of crucial commodities,” said Liu Zongyi, secretary- general of the Research Center for China- South Asia Cooperation at the Shanghai Institutes for International Studies.