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Indonesian palm oil exports may fall due to DMO, B35
Indonesian exports of palm oil could fall due to an increase in the country’s domestic market obligation (DMO) and a 5% increase in its palm oil biodiesel blending mandate to B35 on 1 February, Mintec Global reported on 6 January.
The government’s move to change its DMO from 1:8 to 1:6 on 1 January meant that a higher proportion of palm oil that would have been exported would now find its way into the domestic market, the report said. The DMO requires palm oil exporters to sell a portion of their products domestically before they can export them.
In addition, Indonesia’s announcement that it would move to B35 – a 35% palm biodiesel blend in diesel fuel – from the B30 rate in place since January 2020 would lead to around 120,000 tonnes/month, or 1.44M tonnes/year of palm oil supply being consumed domestically.
As Indonesia is the largest palm oil producer globally, the changes could lower palm oil supply and lead to higher prices, the report said.
However, a trader told Mintec that good traders should have had the two factors priced in and vegetable oils were also cheaper now, with palm oil facing more competition from other vegetable oils than it did a few months ago.
Meanwhile, the United States Department of Agriculture (USDA) has reduced its 2022/23 forecast for Indonesian palm oil production to 44.7M tonnes due to larger than expected production losses.
The 6 December Foreign Agricultural Network Oilseeds and Products Update on Indonesia set the country's food sector palm oil consumption in 2022/23 at 6.7M tonnes, slightly up from 6.5M tonnes the previous year. Domestic palm oil consumption was forecast at 17.51M tonnes in 2022/23, a 4% rise from 16.8M tonnes in 2020/21.
Palm oil exports in 2022/21 totalled 22.3M tonnes, a significant 17% drop compared to the previous year due to 2022 policies restricting or banning exports of palm oil products. The USDA said it expected Indonesian palm oil exports to increase to 29M tonnes in 2022/23 due to stronger demand from key markets.
