Palm oil prices aren’t due to drop in short term

INDONESIA’S lifting of the ban of its palm oil exports might not have a significant impact on reducing palm oil or world oilseeds prices, at least in the short term, said Thabile Nkunjana, an agricultural economist at National Agricultural Marketing Council (NAMC), yesterday.

Palm oil, which is used in many items from margarine to shampoo, comprises a third of the world’s vegetable oil market and Indonesia accounted for about 60 percent of the supply.

However, whIle the country’s lifting of the ban of its palm oil exports was welcome news globally, the catch was that regulations to maintain local supply and keep prices low still remained thereby giving the world market very little confidence.

He said the regulations such as the Domestic Market Obligation (DMO) and Domestic Price Obligation (DPO) were reinstated.

These were effectively another form of trade restriction, and lifting the ban, in this case, did not necessarily equate to more oilseed supply.

“These are the same policies that were implemented on March 17 and are partly contributing to the current global oilseeds price problems.

The DMO is a policy that requires producers to supply a particular amount of product before exporting, whereas the DPO is a price control mechanism,” Nkunjana said.

According to AgriCensus, an independent price reporting agency, Indonesian officials announced this week that only the companies that requested subsidies and delivered their palm to local markets when the ban was in effect would be permitted to apply for export licences.

The NAMC said given this season’s abundant palm oil production projections in Indonesia, as well as the storage capacity concerns, and rising pressure from palm industry players, particularly smallholder producers, this action was expected.

Large numbers of producers planted palm oil after making profits following a smaller crop during the previous production season.

According to the US Department of Agriculture, palm oil output was expected to reach 46 million metric tons this season, up by 500 000 metric tons. This meant a surplus of about 30 million metric tons to export.