Palm oil declined on the possibility that a sudden ban on Indonesia’s top producer of edible oil exports would not be as tough as fears.
Indonesia will only stop the export of bulk and packaged RBD palmolein, a high-value product that has been processed. According to people familiar with the matter, the export of crude palm oil and RBD palm oil will still be allowed.
Benchmark futures initially stalled when Indonesia said on Friday that a shipment on all cooking oil would begin on April 28 and last until the government resolved the domestic shortage. The announcement came as a setback for the market as the widespread restrictions would worsen global food inflation and increase volatility in crop markets which are still reeling from war.
Palm oil for July delivery in Kuala Lumpur fell 4.1% to 6,097 ringgit per tonne, after a 7% jump in early trade. Palm’s nearest competitor, soybean oil, retreated 1.5% from Chicago’s all-time high.
“Details are still scant for now, and traders are reacting to speculation that the impact of the Indonesian ban may initially be minimal,” said David Ng, senior trader at IcebergX Sdn in Kuala Lumpur. It will be of little relief that the ban should be limited to Olin and not other products, he said.
Crude palm oil is made by crushing the fruits of palm oil. Processing of crude palm oil produces refined, bleached and odorless palm oil, which can be further processed into RBD palm olein. RBD palm olein is used primarily as a cooking oil and in the industrial frying of processed foods.