The country’s USDA post anticipates 46 million tonnes of palm oil production, which would be up from 44.7 during the current marketing year.

The estimate assumes no significant weather events through the remainder of 2022-23. However, a developing El Nino weather pattern for the second half of 2023 could lead to dryness in Indonesia, which would hamper fruit setting and flowering, while lowering palm oil output.

Indonesian palm oil exports are forecast at 28.5 million tonnes in 2023-24, which would be up by only 100,000 tonnes from the current marketing year, with India, China, and Pakistan the major customers.

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The West African country has a history of sometimes deadly conflict between local communities and foreign companies that have cleared huge tracts of land for palm oil and sugarcane plantations in recent years.

Locals have complained of environmental damage, losing their livelihoods and not being fairly compensated for their land. Under the current system, landowners get an annual rent of $2.50 per acre, which was determined by the state.

The Customary Land Rights Act and the Land Commission Act, both enacted on Monday, empower local landowners to negotiate the value of their land with investors and prevent it being leased out without their express consent.

Campaigners and locals praised the move, while one palm oil company executive said it would spell the end of investment.

“To our knowledge there is not a legal regime anywhere, in either hemisphere that grants such robust rights to communities facing harm,” said Eleanor Thompson of Namati, an international legal advocacy group.

A director of SOCFIN, the biggest agribusiness company in Sierra Leone, called it a “dream of NGOs.”

“Certainly it will block any investment… It makes things very expensive and we are all prone to enormous blackmail by various communities,” Gerben Haringsma added.

The Luxembourg-based company has invested more than $150 million in palm oil farming in Sierra Leone. It has also frequently clashed with local landowners.

Lands Minister Turad Senessie said the new laws would encourage investment by ensuring peace and order.

“This is a win-win situation for both business and Sierra Leoneans including rural landowners,” he told Reuters.

One of the laws will also end a colonial-era provision that bars descendants of freed slaves from owning land outside the capital, Freetown.

— Reporting for Reuters by Umaru Fofana.

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The world’s top palm oil exporter announced plans to ban exports on Friday, in a shock move that lifted prices of all edible oils and sowed confusion and alarm among palm oil exporters and consumers alike.

Market panic subsided on Monday after officials told palm oil executives the ban will only apply to exports of refined, bleached and deodorized (RBD) palm olein starting on Thursday, and would not affect flows of crude palm oil or other forms of derivative products.

However, Jakarta will widen the ban “if there is a shortage of refined palm oil,” according to a presentation the government gave to companies on Monday.

RBD palm olein accounts for around 40 per cent of Indonesia’s total exports of palm oil products, according to analysts’ estimates.

The prospect of further tweaks to export restrictions has caused jitters among Indonesian palm oil producers and processors who typically export over twice as much palm oil as is consumed domestically.

“Based on simple calculation, even before one month, all the tanks would be full if it’s a total ban,” said Eddy Martono, secretary general of GAPKI, Indonesia’s biggest palm oil association.

Once tanks run out of space, mills can’t process the fresh fruit bunches, which would rot and force production to drop, Martono told Reuters.

Indonesia’s ban on exports of RBD palm olein will become effective from midnight on April 28 and will remain until prices of cooking oil drop to 14,000 per litre, chief economic minister Airlangga Hartarto said late on Tuesday.

“We should see after the regulation is set, whether production is running smoothly and palm oil mills continues to buy fresh fruit bunches from farmers. If they reduce it means there is an indication the tank will be full,” Martono said.

Indonesia is now holding around five million tonnes of palm oil stocks, and the country’s storage capacity of around six million to seven million tonnes would be full by the end of next month, said a Singapore-based dealer with a global trading firm.

Indonesia produces around four million tonnes of palm oil every month and consumes around 1.5 million tonnes.

In 2021, Indonesia consumed 18.4 million tonnes of palm oil out of total production of 51.3 million tonnes, GAPKI estimates.

“As the domestic cooking oil market is not enough to absorb all the production, a more extended ban may hurt the industry, particularly the smallholders,” said Carolyn Lim, senior manager, corporate communications at Musim Mas, a palm oil producer with plantations in North Sumatra.

Since the ban only covers RBD palm olein, Musim Mas estimated it could last a few months. If it had cover a wider range of products, it would’ve been shorter, Lim said.

Fresh fruit bunch prices have already dropped by between 400 rupiah and 1,000 rupiah per kilogram since the announcement, from 3,700-3,900 per kilogram, Mansuetus Darto, secretary general of Indonesia’s Oil Palm Farmers Union, said in a statement.

“The ban is a political decision to support consumers. But if the government keeps it for a longer period, then farmers will suffer,” said a Mumbai-based vegetable oil dealer with a global trading firm.

Buyers of Indonesian palm oil have already voiced complaints about its export policies and will ask Jakarta to review the policy, said Rasheed JanMohd, chairman of Pakistan Edible oil Refiners Association (PEORA).

“It’s time for Indonesia to cut down use of palm oil for biodiesel and remove the ban. If Indonesia continues the ban, then we would ask the Pakistan government to speak to the Indonesian government to restore supplies,” JanMohd said.

India, the world’s biggest palm oil importer, has requested Indonesia to increase supplies. Read full story

— Reporting for Reuters by Rajendra Jadhav and Bernadette Christina Munthe.

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The halting of shipments of the cooking oil and its raw material, widely used in products ranging from cakes to cosmetics, could raise costs for packaged food producers globally and force governments to choose between using vegetable oils in food or for biofuel. Indonesia counts for more than half of global palm oil supply.

In a video broadcast, Indonesia’s President Joko Widodo said he wanted to ensure the availability of food products at home, after global food inflation soared to a record high following Russia’s invasion of major crop producer Ukraine.

“I will monitor and evaluate the implementation of this policy so availability of cooking oil in the domestic market becomes abundant and affordable,” he said.

The announcement will hurt consumers in top buyer India and globally, said, Atul Chaturvedi, president of trade body the Solvent Extractors Association of India (SEA).

“This move is rather unfortunate and totally unexpected,” he said.

Alternative vegetable oil prices spiked in response to the measure which will take effect on April 28. Soybean oil, the second most used vegetable oil, rose 4.5 per cent to a record high of 83.21 cents/lb. on the Chicago Board of Trade.

Global prices of crude palm oil, which Indonesia uses for cooking oil, have surged to historic highs this year amid rising demand and weak output from top producers Indonesia and Malaysia, plus a move by Indonesia to restrict palm oil exports in January that was lifted in March.

Household product and food companies including Procter + Gamble, Nestle and Unilever are large purchasers of palm oil. Oreo cookie maker Mondelez International accounts for 0.5 per cent of palm oil consumption globally, according to its website.

Other countries have experimented with crop protectionism to try to keep domestic prices down. Argentina, the world’s top exporter of processed soy, briefly halted new overseas sales of soy oil and meal in mid-March before hiking the export tax rate on those products to 33 per cent from 31.

The U.S. Department of Agriculture urged international cooperation during the war in Ukraine, rather than export bans.

Global edible oil markets have been roiled this year by Russia’s invasion of Ukraine, a move Russia calls a “special operation” to demilitarize its neighbour, which cut off shipments of sunflower oil from the region.

The Black Sea accounts for 76 per cent of world sunoil exports and commercial shipping from the region has been severely affected since Russian forces entered Ukraine in February.

Large supplies of alternatives including soy and rapeseed oil are not readily available either, after droughts hurt the most recent crops in Argentina, Brazil and Canada.

New facilities for processing soy and canola oil are expected to open in the U.S. and Canada respectively in coming years, as demand for plant-based biofuels grows, but ramping up production in the near term will be difficult.

Industry group the Clean Fuels Alliance America said the move could hurt biofuel producers, even though U.S. biodiesel and renewable diesel producers don’t use palm oil, as supplies of all oils are tight.

‘Sky’s the limit’

“Sky would be the limit for edible oil prices now. Buyers were banking on palm oil after sunoil supplies fell because of the Ukraine war,” a Mumbai-based dealer at a global trading firm said.

“Now they (buyers) don’t have any option as soyoil supplies are also limited.”

Malaysian producers say the world’s No. 2 palm oil exporter, which is facing a production shortfall due to a pandemic-induced labour shortage, is unlikely to be able to plug the gap.

Indonesia has since 2018 stopped the issuance of new permits for palm oil plantations, often blamed for deforestation and destroying habitats of endangered animals such as orangutans.

Palm oil industry association GAPKI said it would adhere to the policy but had reservations.

“If this policy has any negative impact on the sustainability of the palm oil sector, we would ask the government to re-evaluate the policy,” it said in a statement.

In Indonesia, the retail price of cooking oil averages 26,436 rupiah (C$2.32) per litre, up more than 40 per cent so far this year. In some provinces across the country, the prices have nearly doubled in the past month alone, according to a price monitoring page.

Demonstrations by students have taken place in several cities across Indonesia in recent days over high cooking oil prices.

Indonesia’s government has set a cap of 14,000 rupiah per litre for bulk cooking oil, but Trade Ministry data showed that it was sold at more than 18,000 rupiah this month.

A government investigation is underway into alleged corruption involving sought-after export permits

— Reporting for Reuters by Fransiska Nangoy; additional reporting by Rajendra Jadhav in Mumbai, Mark Weinraub in Chicago, Uday Sampath in Bangalore, Jessica DiNapoli and Stephanie Kelly in New York, Maximilian Heath in Buenos Aires and Mei Mei Chu in Kuala Lumpur; writing by Fransiska Nangoy and Caroline Stauffer.

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The attaché pegged palm oil output to rise by 1.1 per cent at 46 million tonnes due to favourable weather and higher prices for producers. Also, the attaché revised 2021-22 production, raising it one million tonnes from USDA’s official number of 44.5 million.

As well, the estimates for marketing year exports increased, with the attaché raising the 2021-22 figure by one million tonnes at 29 million. The projection for 2022-23 also went up by one million at 30 million tonnes, based on demand increasing as the world recovers from the COVID-19 pandemic.

Also, it was noted, the lack of sunflower exports out of Ukraine due to the war could see more demand for Indonesian palm oil.

Domestic usage was increased as well, citing more palm oil being used for biofuel. Total domestic consumption for 2021-22 was at 16.3 million tonnes, up two per cent from USDA’s official number. Total usage for 2022-23 is expected to push to 16.66 million tonnes.

With more consumption, the attaché lowered ending stocks, with that for 2021-22 at nearly 6.18 million tonnes rather than USDA’s number of 6.5 million. The call for 2022-23 is lowered to about 5.52 million tonnes.

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The Expert Working Group on Feed Supplementation, set up by Dairy Farmers of Canada (DFC) and other industry players in February last year to review those claims, said as much Friday as it published its 84-page report reviewing the matter.

Thus, a “key recommendation” of the report is “the need for better and more consistent time series data both when it comes to the evolution of the fatty acid profile of milk and butter, and butter hardness off retail shelves,” the working group wrote.

The 13-member working group, which included reps from the Consumers’ Association of Canada, processors and farmer groups, “cannot conclude that any perceived increase in the hardness of butter be solely attributed to the use of palm-derived feed supplements,” group chair Daniel Lefebvre said Friday in a release.

“There is a variety of factors that influence the fatty acid profile of milk which is only one of the factors that can affect butter consistency. We have also concluded there are gaps in the body of knowledge that should be addressed, and we offered a series of recommendations to better understand issues related to the properties of butter while also ensuring that industry is better equipped to meet consumer expectations.”

DFC, for its part, said in a release Friday it “supports the conclusion of the report” and will fund further research to “address the remaining questions” the report lays out.

All that said, DFC’s recommendation to dairy farmers last February — that they “consider alternatives to palm supplements” in their cattle rations, pending the review’s outcome — still stands.

“In light of remaining unanswered questions, DFC’s recommendation that dairy farmers consider alternatives to palm byproducts supplements in feed rations remains,” a DFC spokesperson said via email late Friday.

Similarly, a request last February from les Producteurs de lait du Quebec (PLQ) — asking that Quebec producers stop using such products in their rations, and that food processors adjust their recipes accordingly — still stands, a PLQ spokesperson said separately Saturday.

The working group’s assignment came in the wake of what DFC last February described as “recent anecdotal reports regarding the hardness of butter.”

Specifically, complaints were appearing on social media from Canadian consumers alleging their recently-purchased butter wasn’t softening to a spreadable consistency at room temperature.

At that time, the working group said in its report, “consumer organizations in Canada received contacts from individuals expressing concerns about this issue; particularly as it related to the use of butter in baking. However, given other issues that were occurring at the time due to the pandemic, these contacts were not widespread.”

Butter samples

The working group, chaired by Lefebvre, the chief operations officer for Lactanet, said Friday it met seven times from March to December 2021 and “sought presentations and reports from several outside experts.”

On top of its literature review, the group also commissioned two “data collection efforts.” One was to assess, compile and analyze data on “the fatty acid composition of raw milk from across Canada.” The other involved collecting 40 samples of retail butter from across Canada and analyzing those samples’ fatty acid profile and “physical properties.”

The working group, in its report, noted there are about 400 different fatty acids in milk, so “when people first heard the term ‘palmitic acid,’ most people had limited background available to understand what it means in the broader scientific context.”

Palmitic acid, the group said, is “the predominant fatty acid in milk, regardless of what cows eat” and “is also the most common saturated fatty acid in nature. Cows produce palmitic acid naturally, along with hundreds of other fatty acids in their milk.”

While livestock feed ingredients also contain such fatty acids, the group said, “feeding cows palm-derived feed supplements is not the main factor contributing to palmitic acid in milk.”

Rather, the group said, most of the palmitic acid in milk comes from the cow’s consumption of “traditional” feed ingredients such as hay, silage, grass and cereal grains and the cow synthesizing it naturally in the udder.

Fatty acid composition of milk, the group said, is also influenced by “a variety of other factors” including — but not limited to — the season, stage of lactation and diet, which in turn is “influenced by geographic region.”

The group’s literature review showed cream handling, temperature of storage and churning are “key factors that may affect the rheological properties of final products” — that is, the melting points of butter or its firmness and perceived “spreadability.”

The group’s consultations with processors found “while there has been a significant shift in demand from the restaurant and hospitality industry to the retail sector” due to the COVID-19 pandemic, there nevertheless has been “no significant change in manufacturing processes and practices over the past year and a half.”

It’s true that palmitic acid concentration in butter is “positively correlated” with the percentage of solid fat in butter and its firmness at room temperature, the working group said, but its survey of retail butter samples found “many other” milk fatty acids are also tied, for better or worse, to the solid fat content and firmness in butter.

Further, the group said, “while the content of palmitic acid in retail butter varies across the country, this variation could not be attributed to one single factor such as feeding cows supplements that contain palmitic acid.”

The group also emphasized any feed-related increases in palmitic acid content in butter would be “modest and extremely unlikely to have human health implications.”

‘Knowledge gaps’

Ultimately, in its report’s summary, the group “observed there is no data to confirm that there has been a change in the consistency of butter over time.”

That same lack of data means it’s “not possible to test for a causal relationship, and therefore draw conclusions” on any link between use of palm byproduct supplements on Canadian dairy farms and the consistency of butter in recent years, the group said.

The working group’s report “sheds light into the knowledge gaps related to the consistency of butter and animal feed supplements containing palm byproducts,” DFC president Pierre Lampron said Friday in that group’s release.

Lefebvre, Lampron said, has been asked to “continue to work with the industry experts in an advisory capacity to help support the design of such future research.”

The Animal Nutrition Association of Canada, which represents feed processors, and the Dairy Processors Association of Canada said Friday they will both keep working with DFC and the industry to continue research into the matter. — Glacier FarmMedia Network

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