JAKARTA- Indonesia will have to export 6 million tons 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 the 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 domestic market obligation (DMO) – to shore up supplies of cooking oil.
The Indonesian Palm Oil Association (GAPKI) welcomed the levy waiver, but wanted it 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 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 tons 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 tons a month, which means reducing stocks requires “twice the amount of exports or about 6 million tons at least until August,” Eddy said.
Prior to the export ban, Indonesia usually exported around 3 million tons of palm oil products and typically managed about 3 million to 4 million tons in inventories.
