Fears of a complete ban eased as Indonesia said it will only halt exports of RBD palm olein, a product that has been processed, while shipments of crude palm oil can continue. The move has threatened to tighten global vegetable oil supplies at a time of soaring food inflation fueled by the war in Ukraine.
Palm oil is one of the most versatile staples, used in thousands of products from food to personal care items and biofuels. The move could increase costs for packaged food producers such as Nestle SA, Mondelez International Inc. and Unilever Plc,like biscuits, noodles, cakes and ice cream. It might also increase inflation risks for top importers like India and China.
“Supply will be tight until at least the year-end as top producer Indonesia implements moves to secure its own domestic supply,” said Rajesh Modi, a trader at Sprint Exim Pte in Singapore. “Any correction in the market will be a prompt to buy.” Palm oil futures rose 2.6% to 6,389 ringgit a ton as of 11:11 a.m. in Kuala Lumpur after a volatile day of trading. Prices had gained as much as 7% Monday and slumped about 4%. Rival soybean oil rose 0.8% on Tuesday.
Indonesia imposed the ban just as the country that’s home to the world’s largest Muslim population heads into the Eid al-Fitr holiday. The local shortage of edible oil has led to street protests and become a key political issue for President Joko Widodo amid concern it will push up other food prices as well.
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