Indonesia has to ship 6MTs of palm oil up to August to clear tanks

July 18, 2022: Indonesia will have to export 6 million tonnes of palm oil until August if it wants to cut its ballooning inventory levels back to normal, an industry association said on Monday after the government waived its export levy for one and a half months.

The world's biggest palm oil exporter over the weekend removed a levy on exports of vegetable oil until August and tweaked the details of progressive levy rates for September, in a bid to boost exports and ease high domestic stock levels. 

Domestic inventories have risen after Jakarta imposed a three-week palm oil export ban in April and May. The resumption of exports did little to alleviate stocks as authorities have since May imposed mandatory domestic sales rules - known as a domestic market obligation (DMO) - to shore up supplies of cooking oil.

The Indonesian Palm Oil Association (GAPKI) welcomed the levy waiver but wanted it to be complemented with DMO removal, arguing the industry has been severely disrupted by the storage crisis, forcing mills to limit palm fruit purchases and angering farmers just ahead of the peak harvest season.

"The most important thing until September is clearing up tanks and a smooth export flow must be the main focus," GAPKI's secretary general Eddy Martono told Reuters.

Indonesia currently has about 7 million tonnes of palm oil in tanks, including in make-shift floating storage facilities, he said.

During peak harvest season, the country typically produces 3 to 4 million tonnes a month, which means reducing stocks requires "twice the amount of exports or about 6 million tonnes at least until August," Eddy said.

Prior to the export ban, Indonesia usually exported around 3 million tonnes of palm oil products and typically managed about 3 million to 4 million tonnes in inventories.

Government officials did not respond to requests for comment on GAPKI's request to scrap DMO rules.

Late on Sunday, the economy ministry issued a statement saying some of the progressive palm oil levy rates to be applied in September will be below previous rates, to ensure "the distribution of added value" in the palm oil industry.

Reuters