Indonesia's Ban On Processed Palm Oil Export Kicks In Today: How Will Consumers, Businesses Be Hit?

As Indonesia vows to curb the surging cooking oil prices domestically, the country's President Joko Widodo has imposed a ban on the export of palm oil. 

The ban, which kicks in on Thursday, has already ignited worries of high global food prices amid the already rising inflation caused by the Russia-Ukraine war. 

Why It Matters: Indonesia accounts for a third of global edible oil exports. This comes as another blow after a recent surge in prices due to the Ukraine-Russia war, which caused a huge supply deficit.

How That impacts you: Processed palm oil is a key ingredient in cooking oil and is also used in almost everything from snacks and ice cream to cosmetics.

The oil is used for manufacturing several daily goods ranging from soaps to margarine, shampoos, noodles, and biscuits. So, the ban will resonate worldwide, threatening to drive up costs for the likes of Nestle SA NSRGY, Mondelez International Inc. MDLZ, and Unilever PLC UL.

How It Impacts Businesses: The ban comes as the biggest setback for the companies that rely on palm oil to manufacture their products. One of India's top brokerages, PL Research, said that the ban would "exacerbate" margin concerns. 

"We believe the increase in palm oil prices will further impact the margins."

Who Will Be The Worst-hit: According to the data from Statistics Indonesia of 2020, India was the biggest buyer of Indonesia's palm oil, accounting for 16.2%, followed by China at 15.5% and Pakistan at 9.0%.

Posted In: IndonesiaJoko WidodoPalm oilAsiaNewsCommoditiesMarkets