Palm Oil Surges 10% As Indonesia Ban Takes Effect

Palm oil futures jumped to a fresh record high of 10 percent on the global market as traders prepare for the start of Indonesia’s export ban today, April 29, 2022.

Palm oil futures for July delivery rose by the 10 percent trading limit before closing 9.4 percent higher at 185,589.36 shillings ($1,606) a ton, the highest since March 9. Prices are on track for a 23 percent gain in April 2022.

Meanwhile, palm’s closest rival, Soybean oil, has also climbed 2.3 percent to a fresh record in Chicago.

Indonesian markets will be shut on Friday, April 29, 2022, and all of next week, while Malaysia, where all attention is now turning to olein demand, will be closed from May 2 to May 4, 2022.

Although the move by Indonesia will halt only certain products nor violate the World Trade Organization’s rules, it could still have serious effects on the world as it accounts for a third of the global vegetable oil trade.

World food prices are already at an all-time high due to the supply disruption caused by the war in Ukraine. More disruptions mean that the prices will continue soaring further.

Many countries, including Kenya, depend on Palm oil as an alternative to the costly soybean and sunflower oil. Most of Kenya’s palm oil comes from Indonesia, where the two islands of Borneo and Sumatra, some of the world’s biggest palm oil suppliers, are. Malaysia is the second biggest market for Kenya’s palm oil.

Crude palm oil, which makes virtually all of the country’s imports at 93 percent, has significantly affected the local market. The commodity has gone above USD 130 a barrel in the global market.

According to the Kenya Association of Manufacturers (KAM), the prices of edible oils have increased in recent months due to an increase in the price of crude palm oil in the global market.

The prices of cooking oil have jumped by almost 33 percent Since March 2022 in Kenya, making it the country’s most expensive essential commodity.

A liter of Fresh Fri and Avena cooking oil in major shopping outlets now sells at 385 shillings. A 5 liter and 10 liters of the same commodities are going for 1700 shillings and 3400 shillings, respectively.

This, plus the increase in other essential commodities such as Maize flour which now costs 148 shillings per 2Kg packet, detergents, vegetables, and even grains whose prices have since doubled, is affecting Kenyans to the core.

Already, many people cannot afford the three basic meals in a day.