To protect domestic supply amid rising cooking oil prices ahead of upcoming Islamic festivals, Indonesia is suspending some palm oil export permits.
Palm oil exporters had collected large shipment quotas last year, and they now had little reason to supply the domestic market. Indonesia issues export permits for palm oil companies that have already sold a proportion of their products to the domestic market, under a policy known as “Domestic Market Obligation” (DMO).
The DMO presently permits export volumes that are six times what companies have sold at home. Exporters will use their export rights after the situation has calmed. About a third of existing export quotas could be used now, while the rest could be used after May 1.
In fact, exporters held around 5.9 million tons worth of export permits at the end of January. Exporters could increase their quota when they raised supplies for the domestic market. Retailers have complained that cooking oil packages at lower prices have been hard to procure, and they have been forced to sell them above the regulated price of 14,000 rupiah ($0.93) per litre.
The Trade Ministry last month said palm oil companies had been ordered to increase domestic supply to 450,000 tons per month until April, up from roughly 300,000 tons per month previously. Food prices typically rise ahead of the Islamic month of Ramadan and the Eid al-Fitr celebration, which falls in April this year.
Companies have been holding back exports due to lower global market prices and high export levies. With little urgency for exports, companies were also not encouraged to meet their DMO.