Dubai: No sooner did Indonesia signal higher export taxes on palm oil than India said it may cut import duty. The moves by the two governments highlight the struggle to contain living costs for their 1.3 billion people.
Prices of palm oil and its rival soya bean oil hit records on Tuesday.
“Edible oil is an essential ingredient in our food intake and globally there is a problem,” said Amol Tilak, an analyst at Mumbai-based Kotak Commodity Services Ltd. “Demand is huge, while supply hasn’t yet improved.”
Economic growth in China and India, drought in Australia and diversion of crops for making ethanol are threatening food security for some of the world’s most vulnerable people, Asian Development Bank said last month. In Asia alone, more than 617 million people live on less than $1 (Rs39.60) a day, it said.
Benchmark palm oil prices have more than doubled in the past two years to 3,411 ringgit ($1,055) a tonne in Malaysia, while soya bean oil in Chicago jumped as much as 1% to 55.97 cents a pound.
Prices of foods from bread to milk have surged, prompting governments to stockpile, restrict exports and buy overseas to safeguard supplies.
“You can only spend so much when you walk into a supermarket,” Ben Santoso, a plantation analyst at DBS Vickers Securities in Singapore, said. “Governments will do something now.”
Indonesia, the world’s biggest palm oil producer, announced on Monday it would impose a 15% tax on exports should prices exceed $1,100 a tonne. The levy will climb to 20% if the price rises to $1,200, and to 25% if it reaches $1,300, a statement issued by the coordinating ministry for economic affairs in Jakarta said.
India, the world’s biggest buyer of edible oil after China, said on Tuesday it may cut import duties on cooking fats or buy more on global markets. The country cut the import tax four times last year on cooking oils, banned trading in wheat futures and curbed exports of wheat, rice and lentils to boost supply.
“Improving supplies and reducing prices is the main concern for the government,” said T. Nanda Kumar, India’s top official charged with food security, in an interview in Dubai.
“We will continue to track prices and take the steps needed,” the food secretary said.
India, also the world’s second largest wheat user, will buy more of the crop from its farmers to help secure stockpiles. The government may buy as much as 15 million tonnes, up 35% from a year earlier, Kumar said.
World wheat supplies are at their lowest in three decades as wheat prices in Chicago doubled in the past year, reaching a record $10.095 a bushel on 17 December.
Pratik Parija in New Delhi contributed to this story.