Dorab Mistry, a well-known international vegetable oil market expert and Director of Godrej International Ltd, has stressed the need for Indonesia to allow immediate export of palm oil after having lifted the ban on shipments from May 23.

In an open letter to the Indonesian Government, a copy of which was released to the media by the Solvent Extractors’ Association of India (SEA), he asked the Indonesian government to allow immediate export of shipments of all previously banned fractions of palm oil to help small holder farmers in Indonesia and also customers in other parts of the world.

Stating that Indonesian smallholder farmers are almost facing a calamity, he said the combination of historical record stocks, full storage tanks, boom cycle in production, poor demand and restricted exports spells almost certain doom for the Indonesian farmer.

Industry set to halt

Indonesia is heading towards a calamitous situation as the palm exports are still not fully operational despite the Indonesian President announcing that they will be released from May 23, he said.

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“We estimate stocks have already reached historical highs surpassing 7 million tonnes (mt). If unrestricted exports do not start before the end of May, we foresee a situation where all storage tanks will be full and the industry will grind to a halt,” he said, adding, the loser in this will be the poor Indonesian farmer.

He said the Indonesian farmers were already facing punitive levies and taxes of $575 a tonne compared to their Malaysian counterparts who pay $125 a tonne. But now Indonesian farmers face the incredible situation of not being able to harvest their fruit. Instead, they will be forced to watch it rot on the trees. “I think it’s already inevitable that some farmers will face this situation in early June even if exports start immediately,” Mistry said.

Entering boom cycle

The problem of the extended export ban is exacerbated by the fact that Indonesia is now entering a boom cycle for production following an extended period of almost perfect rainfall.

He said the recent export ban by Indonesia has also forced countries to look at their reliance on Indonesian palm oil, and find ways of making soft oils available at a cheaper price.

India has removed the cess on soft oils for domestic refiners such that palm oil is now more expensive than soyabean oil in both China and India thereby hurting demand for palm oil, he said.

“The only way for the Indonesian government to avoid a complete economic disaster for its farmers is to have an immediate unrestricted export policy. Unfortunately, this does not seem to be the avenue the government is taking as a number of ministerial statements seem to suggest that exports will be linked to sales of domestic cooking oil despite the fact that the domestic market also seems to be saturated. We read reports that the trade are struggling to increase sales despite their best efforts,” he said in the letter.

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