Indonesia bans palm and cooking oil exports

NEWS Indonesia bans palm and cooking oil exports

Indonesia will ban all cooking oil exports and their raw materials, including palm oil, effective from 28 April, President Joko Widodo announced on 22 April.

Widodo said he wanted to ensure the availability of food products at home after global food inflation soared to a record high following Russia's invasion of major crop producer Ukraine, Reuters wrote. "I will monitor and evaluate the implementation of this policy so availability of cooking oil in the domestic market becomes abundant and affordable," he said.

Indonesia is the world's top palm oil exporter and accounts for more than half of global palm oil supply.

AgriCensus said the shock measure had been introduced against a backdrop of mounting civil unrest as the cost of living had surged domestically, amid reports that Widodo was considering extending his term as the country's president.

The government had placed new responsibilities on exporters to guarantee domestic supply when exporting, and introduced new reference prices, but the measures had produced mixed results, with accusations of corruption (see story below).

The shock announcement would hurt top palm oil consumers such as India, Atul Chaturvedi, president of Indian Solvent Extractors Association of India (SEA) said.

AgriCensus wrote that palm oil prices would be bullish with export availability limited, to the advantage of other suppliers such as Malaysia, Colombia, Papua New Guinea and Thailand.

Alternative vegetable oil prices spiked in response to the announcement, with soyabean oil rising 4.5% to a record high of U$83.21/pound on the Chicago Board of Trade, Reuters wrote on 23 April.

Exporters reject drought-affected cocoa beans

Ivory Coast exporters have been rejecting more than half of drought-affected cocoa beans due to poor quality, Reuters reported on 15 March.

The November to March dry season in the world’s top cocoa producer had been hotter and dryer than usual this year, with lack of rain still affecting many parts of the country,

Lack of moisture caused cocoa beans to become small and acidic. With the dry weather causing damage to the last stage of the October to March main crop, some farmers feared it could also impact the upcoming midcrop, which ran from April to September, the report said.

Photo: Pixabay

Cocoa beans can become small and acidic due to lack of moisture

Of the 11 exporters and grinders that Reuters interviewed at the main ports of Abidjan and San Pedro, some said they had turned down more than half the beans received since January.

“Cocoa of this quality is not exportable. We are refusing on average 50% of deliveries because of this,” an exporter from a European company based in San Pedro said.

In some shipments, beans have arrived with a free fatty acid (FFA) content of 5% or 6%, far above the standard of 1.75% accepted for international exports, according to the commercial director of an Abidjan export company.

Beans were also smaller and lower in cocoa butter content, Reuters wrote,

Exporters and grinders both said they expected poor cocoa bean quality to persist for the first two to three months of the mid-crop.

IN BRIEF

FRANCE: French vegetable oil and biodiesel group Avril said on 13 April that it plans to expand its sunflowerseed crushing capacity to become more independent in sunflower oil and meal. "In processing more than 1M tonnes of sunflowerseeds, over 50% of France's production of sunflower will be valorised by our group,” the company said when announcing its 2021 results.

“Our project will also contribute to the expansion of this crop, which is expected to increase in surface area by 900,000 ha or 30% compared to 2021.”

Four charged in cooking oil conspiracy

An Indonesian trade official and three palm oil executives have been charged in connection with a cooking oil shortage conspiracy, Mongabay reported on 19 April.

The suspects allegedly conspired to secure export permits to sell crude palm oil (CPO) at record high prices internationally, contrary to a domestic market obligation, the report said.

The Indonesian government had imposed a domestic market obligation policy (DMO) in February due to a cooking oil shortage, mandating companies to allocate 20% of their CPO for domestic use and imposing a domestic price obligation (DPO) which capped the CPO selling price.

The Attorney General’s Office (AGO) announced on 19 April that it had charged Indrasari Wisnu Wardhana, the director-general of foreign trade at the Ministry of Trade, for issuing CPO export permits to four companies: the Permata Hijau Group, Wilmar Nabati Indonesia, Multimas Nabati Asahan and Musim Mas.

Prosecutors alleged that the companies failed to meet the DPO requirement but managed to secure export permits from Indrasari, allowing them to take advantage of record high prices on the international market. The companies also allegedly sold CPO on the domestic market at prices higher than those set by the government.

Executives from the four companies, including Wilmar Nabati Indonesia commissioner Master Parulian Tumanggor, were also charged.

In response, the Wilmar Group stated it would support the law enforcement process, Tempo reported on 20 April.

The company also claimed that it had complied with all applicable regulations related to palm oil exports.

NEWS

Food producers reversing palm oil ban

A sunflower oil shortage resulting from Russia's invasion of Ukraine is forcing food producers to reverse their ban on palm oil, Edge Markets reported on 29 March.

Together, Ukraine and Russia account for around 70% of the world’s sunflower oil exports and food manufacturers warned that supplies could run out due to crops being trapped, the Daily Telegraph wrote.

UK supermarket Iceland, for example, had been forced to reverse its ban on palm oil in all its own-brand products. The chain would start selling a limited range of own-label products containing palm oil from June, a reversal of the ban it introduced in 2018 in a stand against tropical deforestation, the newspaper reported on 28 March.

Iceland managing director Richard Walker said the move was a temporary measure and it would only use certified sustainable palm oil as an ingredient.

“Now that it [sunflower oil] has suddenly become unaffordable, or totally unobtainable, we are working closely with our suppliers to find alternatives,” he added.

POLITICO news service reported on 14 April that several food companies operating in the EU were also changing recipes with a leading multinational saying that both palm and soyabean oils were "the most obvious" replacements for sunflower oil. "While the Russia-Ukraine conflict has spun the world into more turmoil ... the solution for the edible oil sector may lie in a reverse to the old ways through the adoption of various palm oil/palm olein ... applications," writes the Council of Palm Oil Production Countries.

Alfa Laval to acquire Desmet

Swedish fluid handling, centrifugal and heat transfer company Alfa Laval has signed an agreement to acquire edible oil and biofuel technology supplier Desmet, part of the Desmet Ballestra Group, the companies announced on 31 March.

The unit would operate as a stand-alone entity within Alfa Laval’s Food & Water Division, and strengthen Alfa Laval’s position in the markets for edible oils, biofuels, and plant and animal-based proteins for food and feed, the firms said.

“It will add know-how and expertise to accelerate future innovations within food, feed and biofuels – and strengthen our ability to support the transformation towards renewable fuels,” Alfa Laval president and CEO Tom Erixon said.

Headquartered in Brussels, Belgium, Desmet has around 1,000 employees in Europe, India, Latin America, North America and Southeast Asia. Last year, the business had a turnover of €300M (US$330M).

The operational units and brands of Rosedowns and Stolz are included in the transaction, expected to close during the second quarter of this year, subject to customary conditions, according to the companies.

The Desmet Ballestra Group is currently owned by Financière DSBG, and ultimately controlled by European specialist financier Kartesia and US investment firm Farallon Capital. Alfa Laval specialises in heat transfer, centrifugal separation and fluid handling systems, and is active in the energy, marine, and food & water sectors.

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IN BRIEF

EUROPE: EU farmers will increase their sowing of corn, sunflowers and protein crops resulting in a very good 2022 harvest for cereals and oilseeds, according to a 5 April report by the European Commission (EC), reported by World Grain.

EU oilseed production was projected to grow by 6.5% to 30.2M tonnes this marketing year, and to increase to 32.2M tonnes in 2022/23, with the latter including 11.2M tonnes of sunflowerseeds.

SAUDI ARABIA: The Saudi Agricultural and Livestock Investment Company (SALIC) has acquired a 35.4% stake in Olam Group subsidiary, Olam Agri Holdings.

SALIC – a subsidiary of the Public Investment Fund (PIF) of Saudi Arabia – said on 29 March that it expected the US$1.24bn transaction to be completed this year, subject to approval from the relevant international authorities.

SALIC Group CEO Sulaiman Al Rumaih said the partnership with Olam Agri aimed to support SALIC’s mission to achieve food security for the Kingdom of Saudi Arabia through investments in both domestic and international opportunities.

Olam Agri specialises in the processing and trading of animal feed, grains, oilseeds and rice and is active in more than 30 countries.

MALAYSIA: The Malaysian Palm Oil Board (MPOB) is reviewing the sustainability standards within the Malaysian Sustainable Palm Oil (MSPO) certification scheme to align it with stricter international schemes, the Malaysian Reserve reported on 29 March.

As of 28 February, about 95% of all the country’s oil palm oil planted area had been MSPO-certified, the MPOB said.

Cargill halts purchases of palm oil from Sime Darby

Global agribusiness giant Cargill has suspended palm oil purchases from Malaysia’s Sime Darby Plantation due to concerns over the use of forced labour, Bloomberg News wrote on 18 April.

Sime Darby said that since 25 February, Cargill had suspended all new sourcing of palm oil and derivative products from the company. It did not give a reason for the halt but said that it was in talks with Cargill, according to the report.

In late January, US Customs and Borders Protection said it would seize Sime Darby’s palm oil and related goods as it had sufficient information to determine that the company’s products were made using convicts, forced or indentured labour, the report said.

Cargill was not available for comment at the time of publication, Bloomberg News wrote.

Italian confectionery giant Ferrero has also stopped sourcing palm oil from Sime Darby over concerns on the use of forced labour, according to a Reuters report on 15 April,

“On 6 April, we requested all our direct suppliers to stop supplying Ferrero with palm oil and palm kernel oil sourced indirectly from Sime Darby until further notice," Ferrero told Reuters.

Leading chocolate manufacturer Hershey and US food giant General Mills had also halted palm oil purchases from Sime Darby, Reuters wrote.

Sime Darby said Ferrero, Hershey and General Mills were not customers.

Unilever pilots blockchain system for palm oil

Photo: Adobe Stock

Unilever says blockchain technology allows it to increase traceability and transparency in its palm oil supply chain

Unilever said on 21 March that it had launched a pilot blockchain system to increase traceability and transparency in its global palm oil supply chain.

The consumer goods giant said it had applied the GreenToken by SAP system to source more than 188,000 tonnes of palm oil fruit in Indonesia. The system had enabled Golden Agri-Resources and other Unilever suppliers to create tokens that mirrored the material flow of palm oil throughout the supply chain and captured the specific attributes linked to the oil’s origin.

“With GreenToken, we want to bring the same traceability and transparency to bulk raw materials that you get from scanning a bar or QR code on any consumer product,” GreenToken by SAP general manager Nitin Jain said.

China's soyabean imports to hit record

China's soyabean imports are forecast to hit a record 104M tonnes in 2022/23 due to increased feed demand and high prices of protein-rich substitutes, according to a US Department of Agriculture (USDA) forecast.

The USDA 17 March forecast also predicted that China’s 2022/23 oilseed consumption would reach 166.7M tonnes, up from an estimated 163.5M tonnes in the previous year. "Greater sow and hog inventories following the African Swine Flu (ASF) outbreak in 2018, combined with high poultry production capacity and steadily increasing ruminant and aquaculture production, are expected to boost feed demand in 2022/23, pushing soyabean imports to a record 100M tonnes," the USDA wrote.

The rise in soyabean imports was also expected to be supported by higher soya meal usage in animal feed linked to higher prices of substitute products, AgriCensus wrote on 18 March.

Soyabean crushing volumes were expected to increase in 2022/23 to 98.5M tonnes but plants would remain under-utilised.

The USDA forecast oilseed production to rise slightly to 62.4M tonnes in 2022/23 from an estimated 61M tonnes in 2021/22 on expected higher subsidy rates for soyabeans and stronger prices and demand for other oilseeds.