Indonesia’s palm oil ban: Prices of food and detergents likely to rise in SA

South African consumers are likely to experience more price hikes in food and soaps made from palm oil. This comes after Indonesia implemented a ban on the exportation of this vegetable oil on Thursday 28 April to curb shortages.

According to Business Insider, the Southeast Asian country exports almost two-thirds of the world’s palm oil, making it the world’s largest palm oil producer

The current palm oil ban announced by Indonesia is a result of the Ukraine-Russia war. Due to a shortage in sunflower oil, which both countries produce, other nations have turned to palm oil as edible oil. The high demand puts pressure on Indonesia to produce the oil in larger quantities, thus causing a shortage.

However, there is a silver lining, according to Morné Botes who is Southern Oil’s Commercial Director, who told Business Insider that the Indonesian domestic market could only absorb between 35% and 40% of what it produces

“Any shortage will be short term, as Indonesia will be required to export product as they can only store a certain amount of product and will be forced to export [sell] as they are unable to carry stock.

“In the short term, unfortunately, pricing will be impacted, and alternative options will need to be used which is at higher price levels than palm (ie, Canola, coconut, or Sunflower),” he explained.

PRODUCTS MADE FROM PALM OIL THAT COULD BE AFFECTED

According to Ethical Consumer, palm oil is widely used in food because it is economical to grow and has a largely neutral flavour.

A list of food made from palm oil includes bread, breakfast bars, butter/margarine, cake, cereal, chocolate/chocolate spread, baby formula, dog/cat food, dried nuts and more.

Other non-edible products include detergent, soap, lipstick and shampoo.

“Palm is seen as a lower-cost solution, and is used in detergents, snacks and within the Hotel Restaurant and Catering (HORECA) market segment… The most significant impact can, however, be seen in low-cost products like detergents, soap, and within the quick-service,” Bortes adds.