by SAVIOUS KWINIKA
JOHANNESBURG, (CAJ News) – INDONESIA’S decision to ban exports of palm oil will have implications on both prices and supplies of the commodity in South Africa.
The Southeast Asian country, which has accounted for an average of 54 percent of global palm oil exports in value terms over the past five years, has imposed the ban to ensure the protection of domestic consumers from rising prices.
This export embargo coincides with the Black Sea region, which accounts for nearly two-thirds of the sunflower oil, facing constrained export capacity because of the war and the destruction of infrastructure and agricultural fields.
Before this recent ban on palm oil exports, the price impact of the Black Sea export disruption and tighter palm oil supplies in Asia had been visible in rising prices, according to the Agricultural Business Chamber (Agbiz).
“For South Africa, these developments have implications on both prices and supplies,” Wandile Sihlobo, the Agbiz economist, stated.
He noted South Africa is a net importer of vegetable oil, with an annual average of 450 000 tonnes imported over the past decade.
In that volume, Indonesia accounted for 66 percent of imports.
The remainder of the volume was imported from Malaysia, another Southeastern Asia country.
Sihlobo said the ban on exports by this key supplier would disrupt the palm oil supplies of South Africa over the coming months.
“Hence, this latest development will exacerbate the situation of already elevated prices across all vegetable oils such as canola, cotton, soybean, and sunflower oils.”
On a positive note, these disruptions occur when the domestic sunflower seed production has improved notably.
The domestic 2022/23 marketing year sunflower seed harvest is estimated at 959 450 tonnes, the second-largest on record.
“If the recent wet weather conditions don’t reduce the yield or quality of the crop, South Africa will at least have some latitude to fill the palm oil gap with sunflower oil,” Sihlobo said.
Nonetheless, the economist projected challenges for businesses that use palm oil for industrial purposes that might not have stocked up already.
Moreover, he noted, in a few weeks, South Africa will begin planting winter crops, including canola.
“The tighter global vegetable oil supplies, and higher prices, could also incentivize the domestic farmers to increase their canola plantings,” Sihlobo added.
– CAJ News