Cooking oil prices to rise further on banned commodity export by Indonesia

Indonesia, the world’s top palm oil producer announced plans to ban exports of the most widely used cooking oil and will likely see Kenyan households dig deeper to pay more for an already expensive commodity.

Indonesia’s move is set to hurt other countries globally and Kenyans will witness a record high commodity price hike since February when Russia invaded Ukraine.

Since February, prices of cooking oil have jumped by 33 percent in Kenya.

The suspension of shipments of the cooking oil and its raw material, which are widely used in products ranging from cakes to cosmetics, might hike costs for packaged food makers around the world, forcing governments to choose between utilizing vegetable oils in food and using biofuel.

Indonesia produces more than half of the world’s palm oil.

Sri Mulyani Indrawati, Indonesia’s Finance Minister said that with demand exceeding supplies, the ban announced earlier on Friday is “among the harshest moves” the government could take after previous measures failed to stabilize domestic prices.

“We know that this is not going to be the best result,” for global supplies, she said in an interview on the side lines of the International Monetary Fund and World Bank spring meetings. “If we are not going to export, that’s definitely going to hit the other countries.”

Indonesia’s President Joko Widodo said he wants to assure the supply of food supplies at home after global food inflation hit a new high following Russia’s invasion of Ukraine, a key grain producer.

“I will monitor and evaluate the implementation of this policy so availability of cooking oil in the domestic market becomes abundant and affordable,” President Joko Widodo said.

The announcement will hurt consumers in top buyers globally.

Alternative vegetable oil prices spiked in response to the measure which will take effect on April 28, 2022.

Soybean oil, the second most used vegetable oil, rose 4.5 percent to a record high of Ksh.83.21 per pound on the Chicago Board of Trade.

Global prices of crude palm oil, which Indonesia uses for cooking oil, have surged to historic highs this year amid rising demand and weak output from top producers – Indonesia and Malaysia, plus a move by Indonesia to restrict palm oil exports in January that was lifted in March.

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