Indonesia’s ban, which was imposed since April 28, was one of the biggest acts of crop protectionism since Russia’s invasion of Ukraine, which stymied exports of sunflower oil and worsened a global shortage.

Palm oil has lost a major pillar of support after top producer Indonesia lifted a ban on exports, paving the way for prices to slump further as supply builds and demand languishes.

Futures have dropped almost 6 percent this week on expectations that Indonesia’s ban would be short-lived. President Joko Widodo said late Thursday that exports can resume from May 23.

This is after considering improvements in domestic supply and prices, as well as the 17 million workers in the industry, he added.

Indonesia’s ban, which was imposed since April 28, was one of the biggest acts of crop protectionism since Russia’s invasion of Ukraine, which stymied exports of sunflower oil and worsened a global shortage.

Palm oil is used in everything from food to soap to fuel, and the move by Indonesia pushed up prices even more, although they have since retreated due to weak demand in top buyers.

The tropical oil may tumble to 5,000 ringgit ($1,135) a ton by July or August because of ample supply in the market, said Tajgir Rahman, general manager of oils and wheat trading at Savola Foods. “A lot of demand destruction has happened in the last few months as palm has become expensive.”

Data from cargo surveyors showed Malaysia’s palm oil exports shrinking to India and China, the two biggest importing nations, in the first half of May even as overall shipments climbed. High prices have stifled demand from both countries, with China’s situation exacerbated by strict Covid lockdowns.

Benchmark futures in Kuala Lumpur last traded at 6,007 ringgit a ton late Thursday. Veteran trader Dorab Mistry forecast earlier this month that palm oil may sink to 5,000 ringgit by June and to 4,000 ringgit by September once Indonesia relaxes its export ban and the war in Ukraine is resolved.

Source: moneycontrol