Indonesia will suspend some palm oil export licenses to secure domestic supply amid rising cooking oil prices ahead of upcoming Islamic festivals, senior minister Luhut Pandjaitan said on his official Instagram account on Monday. Palm oil exporters accumulated large shipping quotas last year and now have little incentive to supply the domestic market, he said.

Indonesia issues export licences to palm oil companies that have already sold a portion of their products to the domestic market under a policy known as "Domestic Market Obligation" (DMO). Currently, the DMO allows export volumes six times higher than companies sold in the country. "Exporters can use these export duties after the situation calms down," said Luhut, Coordinating Minister for Maritime Affairs and Investments.

Firman Hidayat, an official at the same ministry, said about a third of existing export quotas can be used now, while the rest can be used after May 1. He added that exporters kept about 5.9 million tons of export licenses at the end of January. Exporters can increase their quota when they increase supply to the domestic market, he said.

Retailers have complained that packages of cooking oil at lower prices have been difficult to obtain and have been forced to sell them above the regulated price of 14,000 rupees ($0.93) per liter. The Ministry of Commerce said last month that palm oil companies were ordered to increase domestic supply to 450,000 tons per month by April, up from about 300,000 tons per month previously. Food prices generally rise before the Islamic month of Ramadan and the celebration of Eid al-Fitr, which falls in April this year. Sahat Sinaga, president of indonesia's Palm Oil Council, said companies have retained exports due to lower global market prices and high export rates. With little urgency for exports, companies were also not encouraged to meet their DMO. Food prices generally rise before the Islamic month of Ramadan and the celebration of Eid al-Fitr, which falls in April this year. Sahat Sinaga, president of Indonesia's Palm Oil Council, said companies retained exports due to lower global marces and high export rates. With little urgency for exports, companies were also not encouraged to meet their DMO.

Benchmark palm oil prices in Malaysia have fallen more than 40% since they peaked last year. Meanwhile, Indonesia resumed the imposition of export tariffs in November. Sahat blamed distributors for the tight supply in the domestic market. "This is a difficult situation, but everyone must work together. Distributors should not take advantage of the situation," he said.

Shaking global edible oil markets, Indonesia last year banned exports of used palm oil in everything from margarine to cosmetics and fuel for three weeks due to rising cooking oil prices. But palm oil prices have fallen sharply since then to stabilize at lower levels, as the outlook is now less certain with energy prices below their highs and fears of a global recession. The Malaysian palm oil futures market closed on Monday due to a holiday.

(US$ 1 = 15.050,0000 Indonesian rupees, which is equivalent to 0.0052 reais).

Source: Agrolink