*****What forced to Jakarta to backtrack – The Hindu BusinessLine

Clipped from: https://www.thehindubusinessline.com/todays-paper/tp-agri-biz-and-commodity/what-forced-to-jakarta-to-backtrack/article65365059.ece

Close up of fresh oil palm fruits and cooking oil, selective focus.

Close up of fresh oil palm fruits and cooking oil, selective focus. | Photo Credit: slpu9945

Pressure to tame prices, localpolitics couldhave played a role

Indonesia’s flip-flop on export of crude palm oil, RBD (refined, bleached and deodourised) palm oil, and palmolein effective Thursday appears to be tied to the necessity to tame food prices as the country prepares to enter post-Eid period of plentiful consumption.

A ban on crude palm oil (CPO) or RBD palm oil will have serious consequences at the production and consumption ends, traders based in Singapore fear. More damaging could be Indonesia’s reputation as a “sensible” player in international business will be replaced by the sentiment that its leaders are capable of capricious decision-making.

Surprise move

On Wednesday, Indonesia caught the global trade by surprise with its latest flip-flop on export ban saying it would cover crude palm oil. This came as a surprise to the market and Bursia Malaysia Derivatives greeted the decision with a 10 per cent rise in crude palm oil contracts for July above 7,000 Malaysian ringgit.

The decision of including crude palm oil (CPO) in the export ban list came within 48 hours of Jakarta telling the global commodity that CPO will not be banned.

Widodo remarks

Another trading source recounted how last Friday Indonesian President Joko Widodo made some public remark about banning exports and over the weekend, the market rallied. Come Monday, there was a clarification issued to the effect that any potential ban on exports will apply to olein. No mention of crude palm oil or RBD palm oil was made then.

Traders say palm oil exports from Indonesia have continued and prices have remained high on account of global political uncertainty, structural weaknesses in many large economies, supply chain dislocation, the war and the opening of human societies post-Covid. In Indonesia, certain parts have rationed access to palm oil. All this are causing widespread consternation.Globally, edible oils have been surging as oilseeds production was affected by labour shortage in palm oil plantation in South-East Asia and weather impacting soyabean in South America. The Ukraine war has complicated the issue further, with sunflower oil exports from Kremlin and Kyiv coming to a halt.

Pitched battles

Traders say the Indonesian President does not want pitched battles with political opponents nor the extremist elements within the society. The wholesale ban of palm oil, however, does not make sense as it fetches $3-4 billion revenue every month to Jakarta. The revenue comes from from export taxes and duties. Besides, palm oil is a large employer of the most disadvantaged sections of the community. If the export door is shut, there will be oversupply within no time, resulting in local prices collapsing and withdrawal of capacities. From all angles, it would be a lose-lose-lose choice for the government. The next election is due in February 2024 and probably, Widodo could time his actions better, traders say.

For India, the problem is imported inflation with crude and cooking oils contributing in a large measure. Though the Centre has taken various measures to minimise the impact of the surge in edible oils with duty cuts and controlling processors’ prices, it seems to be at its wit’s end with the latest development catching it by surprise. According to the Consumer Affairs Ministry, packaged palm oil prices have increased by 20.15 per cent as of April 27 to Rs. 155.57 a kg at the retail level – the highest rise among cooking oils year-on-year. Sunflower oil prices have gained 15.8 per cent at Rs. 189.1, while mustard oil at Rs. 184.10 has gone up by 13.82 per cent. Groundnut oil has seen a 7.08 per cent rise to Rs. 185.82 and soyabean has surged by 18.44 per cent to Rs. 166.52 a kg.

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