Indonesia will maintain domestic palm oil sales rules to keep local cooking oil prices affordable, a senior government official told Reuters on Monday, noting that a quota for export shipments would have new flexibility.
Palm oil industry players sought the removal of the so-called Domestic Market Requirement, according to which exporters must sell a portion of production locally before obtaining export permits.
To reduce high inventories, the government will from Monday allow exporters to ship nine times the amount sold locally under the DMO, up from seven times before, said Septian Hario Seto, deputy coordinating minister for maritime affairs and investment. , in an interview.
The world's largest palm oil producer implemented the DMO scheme to ensure local supplies of cooking oil after ending the export ban on May 23.
However, the ban and DMO created an overstocking that lowered palm oil fruit prices for farmers.
“We are trying to maintain a balance that is quite tricky to achieve,” said Seto.
“We want the price of cooking oil at 14,000 rupees ($0.94) per litre, we want smooth export flows, while raising the prices of palm oil fruit from farmers,” he said.
Bulk cooking oil averaged around 18,000 rupees per liter in April and now costs around 14,400 rupees.
The resumption of Indonesian exports and speculation of a DMO removal, in addition to higher production in rival Malaysia, helped to depress Malaysian palm oil futures, which lost nearly 32% in June and July.
Sources: investing.com
