Indonesia proposed raising palm oil export quotas on Friday (July 1) and is considering increasing mandatory levels of biodiesel in fuel mixes to prop up prices for farmers at a time when domestic palm oil inventories are high, a senior minister said on Saturday (July 2). Palm oil inventories ballooned and mills limited purchases of fresh fruit bunches (FFB) from farmers after Jakarta stopped exports of crude palm oil and some other derivatives for three weeks to May 23 in a bid to contain soaring domestic cooking oil prices.
Indonesia replaced the ban with a domestic market obligation (DMO), requiring companies to supply a portion of their products to the domestic market through the government's bulk cooking oil programme, and linked DMO volumes to companies' export permits and quotas.
DMO volumes as of the end of June were around 270,000 tonnes, the government said.
The government will now allow companies that have sold palm oil domestically to export seven times the amount of their domestic sales from currently five times, Senior Minister Luhut Pandjaitan said.
"I asked the Trade Ministry to increase the export multiplication factor to seven times starting July 1, with the main objective to increase farmer's FFB prices significantly," Mr Luhut said in a statement. The government allocated 3.4 million tonnes of palm oil export quotas under a "transition period" after the export ban and export acceleration programme. However, shipments have been slow, with Indonesian palm oil industry group Gapki saying exports had been hampered by issues finding ships. The secretary-general of Gapki Eddy Martono on Saturday welcomed the export easing, saying a higher export ratio was better and could "speed up tank drain". To sop up excess domestic inventory, the government will also exercise a plan to raise mandatory biodiesel mix levels to 35 per cent or 40 per cent, depending on crude palm oil supply and price, from 30% currently, Mr Luhut said.