Global vegetable oil prices climbed on Monday to trade near multi-year highs, as Indonesia's decision to ban palm oil exports heightened concerns about global food supplies.
Importers have been left with no option but to pay top dollar for edible oils with inventories of alternatives already running low due to adverse weather and Russia's invasion of Ukraine.
Prices of palm oil, the most widely used vegetable oil, climbed more than 6% on the Bursa Malaysia Derivatives Exchange, inching closer to an all-time high reached in March, while Chicago soyoil futures hovered near their highest since 2008.
In China, Dalian palm oil futures rose 3%, while soyoil added 1.5%.
"The destination markets like India, China, Europe and others are bound to be hit by this new policy," said Anilkumar Bagani, research head of Mumbai-based vegetable oils broker Sunvin Group.
"The palm oil prices, except in Indonesia, shall surge due to the export ban and will inject fresh bullish sentiments in competing vegoil and oilseed prices."
Ban To Tighten Food Supplies
Indonesia, the world's top palm oil producer, announced plans to ban exports on Friday, in a shock move that could further inflame surging global food inflation.
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.
"Indonesia's decision affects not only palm oil availability, but vegetable oils worldwide," James Fry, chairman of commodities consultancy LMC International, told Reuters.
Malaysia's palm oil board said on Monday it is time for countries to reconsider their food versus fuel priorities, as the Indonesian decision has ignited a "crisis" of global edible oil shortage.
"It's very important for countries to ensure available oils and fats are used for food and... temporarily stop or reduce their biodiesel mandates," the Malaysian Palm Oil Board's director general, Ahmad Parveez Ghulam Kadir, told Reuters.
Shares of some of Indonesia's biggest palm oil companies fell on Monday.
Astra Agro Lestari and Triputra Agro Persada dropped more than 6% each, Salim Invomas Pratama SIMP.JK declined 5.5% and Sinar Mas Agro Resources and Technology slid 2.75% soon after market opening.
In other agricultural markets, wheat, corn and soybeans lost ground. Chicago wheat slipped 0.5% to $10.70-1/4 a bushel, corn Cv1 gave up 0.9% to $7.82-1/4 a bushel and soybeans fell 0.9% to $16.72-3/4 a bushel.
Ukraine's state-owned railway company has extended temporary restrictions on the transportation of some agricultural goods over the border to Poland, analysts and officials said on Friday.
Ukraine, a major agricultural producer, used to export most of its goods through seaports but since Russia's invasion in February has been forced to export by train via its western border.
An estimated 91% of the French soft wheat crop was in good or excellent condition in the week to April 18, down from 92% the previous week but above the 85% at the same point last year, farm office FranceAgriMer said on Friday.
Some 32% of the expected grain maize area had been planted, compared with 8% a week earlier and 37% a year ago, the office said in a weekly cereal crop report.
Large speculators raised their net long position in CBOT corn futures in the week to April 19, regulatory data released on Friday showed.
The Commodity Futures Trading Commission's weekly commitments of traders report also showed that noncommercial traders, a category that includes hedge funds, increased their net short position in CBOT wheat and net long position in soybeans.