Bali. India and Pakistan heavily rely on the import of crude palm oil (CPO) from Indonesia, but export restrictions imposed last year have raised concerns in both countries about the supply of CPO from Indonesia.

In April 2022, Indonesia implemented a ban on the export of CPO  due to a shortage of cooking oil in the domestic market. This move surprised India, which heavily relies on Indonesia for palm oil supplies, with imports totaling 5 million tons in 2022. The policy has since been lifted in May 2022 with the normalization of cooking oil supplies domestically.

Consumption of vegetable oil in India and Pakistan continues to rise, driven by a high population growth rate and a lack of domestic vegetable oil production. According to the Executive Director of The Solvent Extractors' Association of India, B V Mehta, vegetable oil consumption in India has seen a significant surge. Compared to 2008-2009, vegetable oil consumption in India increased from 14.1 million tons to 22.5 million tons in 2021-2022.

While domestic vegetable oil production is slowing, demand continues to rise, leading India to increase its imports. Palm oil is the primary commodity imported by India, with 60 percent of these imports coming from Indonesia, Malaysia, and a small portion from Thailand.

"Palm oil is particularly popular in the restaurant and catering sector," Mehta said during the Indonesian Palm Oil Conference (IPOC) 2023 in Nusa Dua, Bali, on Friday.

High demand for CPO has prompted India to request a reevaluation of Indonesia's export policies. "We hope the Indonesian Government can reconsider the current policies," he said.

In September 2023, a delegation of Indonesian officials, headed by Deputy Trade Minister Jerry Sambuaga, participated in the 2nd Sustainable Vegetable Oils Conference held in Mumbai. The primary objective of this visit was to address and counteract the adverse perceptions surrounding CPO in India, specifically focusing on concerns related to sustainability and the alleged negative health impacts of CPO products among Indian consumers.

Pakistan, like India, is another significant destination for Indonesian palm oil exports, and they also hope for Indonesia to evaluate its palm oil export policies.

According to the Chief Executive of the Pakistan Edible Oil Conference (PEOC) and the Westbury Group, Abdul Rasheed Janmohammed, Pakistan plans to purchase palm oil from Indonesia to meet the increasing demand for vegetable oil in late 2023 and early 2024. Pakistan consumes around 4.5 million tons of vegetable oil, while local production is only about 0.75 tons. This makes Pakistan a country that needs to import approximately 3 million tons of vegetable oil.

This demand has increased, especially since Pakistan recently banned genetically modified (GMO) food products, which has limited the supply of vegetable oil.

"We hope Indonesia will continue to open the export door to Pakistan because our domestic vegetable oil production is insufficient to meet our needs," added Abdul.

CPO Prices Expected to Return to $1,000 Next Year
Eddy Martono, Chairman of the Indonesian Palm Oil Business Association (Gapki), predicts that palm oil prices could rise in 2024, returning to $1,000 per ton from the current range of around $800 per ton.

Eddy explained that this year's El Nino, although not as severe as in 2015 and 2019, still affects palm oil production. Next year, a 5% reduction in palm oil production is expected. CPO prices have fallen around 17.5 percent from $ 1.005 in April to $ 829 in September.

According to Eddy, the recovery in demand from China, the second-largest palm oil importer after India, will drive CPO prices. Eddy said that Gapki's sales target in China from 2021-2022 has been around 6 million tons. This year, he hopes that the figure can gradually rise to 7 million tons by the end of 2023. In the coming year, the demand for CPO may return to pre-COVID-19 levels, which was about 8 million tons.

"What we can see now is an increase in the Chinese market, as it used to be around 8 million tons before Covid-19 but decreased during the pandemic," said Eddy during the Indonesian Palm Oil Conference (IPOC) 2023 in Bali, on Friday (11/3/2023).

The 19th IPOC took place at the Bali International Convention Center (BICC) from November 1-3, 2023, with the theme "Enhancing Resilience Amid Market Uncertainty."

In his address, Minister of Trade Zulhas emphasized the importance of the IPOC event as a platform for policymakers, from the local to the international level, to discuss, exchange ideas, and collaborate in advancing the Indonesian palm oil industry, especially amid the current global uncertainties.