Indonesia’s surprise ban of cooking Palm oil exports will not be strict as feared

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Palm oil slumped on prospects that top producer Indonesia’s surprise ban of cooking oil exports will not be strict as feared.

Indonesia will only halt exports of bulk and packaged RBD palm olein, a higher value product that has been processed. Exports of crude palm oil and RBD palm oil will still be allowed, according to people familiar with the matter.

Benchmark futures initially rallied after Indonesia said Friday that a shipment halt on all cooking oil will start from April 28 and last until the government deems a domestic shortage resolved. The announcement came as a shock to the market as a sweeping ban will worsen global food inflation and aggravate volatility in crop markets still reeling from the war.

Palm oil for July delivery tumbled as much as 4.1% to 6,097 ringgit a ton in Kuala Lumpur after jumping 7% in early trade. Soybean oil, palm’s closest rival, retreated from all-time highs in Chicago to drop 1.5%.

“Details are still scant for now, and traders are reacting on speculation that the impact of the Indonesian ban may be less than initially thought,” said David Ng, senior trader at IcebergX Sdn. in Kuala Lumpur. It will be a slight reprieve for the ban to be limited to olein and not other products, he added.

Fruits of the oil palm tree are crushed to produce crude palm oil. Processing crude palm oil produces refined, bleached and deodorized palm oil, which can be further processed into RBD palm olein. RBD palm olein is primarily used as cooking oils and in industrial frying of processed foods. (Source: Bloomberg)