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 were already lower this week on expectations Indonesia’s ban would be short-lived, and late Thursday President Joko Widodo said 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.
Indonesia’s ban, which was imposed on 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 $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.
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-19 lockdowns.