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Indonesia will tighten export rules for palm oil by allowing lower shipments for each ton sold domestically from Jan 1, 2023, to ensure adequate domestic supply, a government official said on Friday (Dec 30, 2022).
Under a new regulation reviewed by Reuters, exporters will be allowed to ship six times their domestic sales, down from eight times the current ratio, an industry official confirmed.
"To secure domestic supply, especially for the first quarter of 2023," said Septian Hario Setio, a senior official at coordinating ministry of maritime and investment affairs, in explaining the reason behind the policy change.
Seto said the ratio will be evaluated periodically by considering the domestic situation, including cooking oil availability and prices.
Indonesia earlier this year had the battle to keep cooking oil prices from spiraling out of control and introduced export measures on palm oil products with varying degrees of success to try to ensure supply and bring the price down.
A brief ban on exports of edible oil from Indonesia shook markets and exacerbated existing global supply concerns, but it also led to ballooning domestic inventory. Indonesia currently imposes a so-called domestic market obligation (DMO) requiring businesses to sell a portion of output locally in return for export permits.
Indonesian Palm Oil Association (GAPKI) Secretary General Eddy Martono in a meeting with the government last week said there were still concerns about cooking oil supply, related to the government's biodiesel programme and expectations of lower palm oil output in the first quarter.
Indonesia is planning to increase the mandatory palm oil component to 35% starting Feb. 1. The world's most populous Muslim country will also celebrate Ramadan in March 2023, when food demand including cooking oil would typically rise, Eddy said.
While businesses would comply with the regulation, Eddy said the new export ratio should be evaluated regularly in the short term to avoid a stock glut.
"If it turns out the forecast is wrong and output did not drop drastically, it must be evaluated, otherwise fresh fruit bunches will be piled up again in mills and this will anger farmers," Eddy said.
Source:
Online/GFMM
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