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Where to Source Palm Oil Since Indonesian Export Ban

Where to Source Palm Oil Since Indonesian Export Ban


Palm oil is the most widely produced vegetable oil in the world and continues to grow in its use, replacing other vegetable oils. More than 85 percent of the world’s palm oil comes from Indonesia and Malaysia, where land is sometimes converted from forest to palm plantations, resulting in greenhouse gas emissions, impacts on biodiversity, and social issues linked to deforestation.

Palm oil, palm kernel oil and palm oil derivatives are used in soap products, toothpastes, antiperspirants, deodorants, and household cleaners.1


Why Indonesia Banned Palm Oil Exports

The last several months have been a wild ride for Indonesia’s palm oil sector, culminating last week in a blanket ban on exports of both crude palm oil and its refined products, such as cooking oil.


Indonesia is the world’s largest supplier of palm oil, so depriving global markets of the commodity is a big deal. This ban affects the cost of basic goods like cooking oil at a time when food prices are already being squeezed. Trade partners will not be pleased. So why did Indonesia take this extraordinary step?


The simple answer is that it’s about prices. According to the Indonesian Palm Oil Association, local production of crude palm oil fell in 2021 compared to 2020, even as global demand surged. When demand increases and supply falls or remains constant, all else being equal, prices will rise. And that is exactly what has happened. In April 2020, a ton of Indonesian crude palm oil was fetching around $545 on the European market. Two years later, that jumped to $1,700.


But a roaring commodity export market presents a kind of paradox, because while it benefits exporters and the current account, the Indonesian government does not want domestic consumers to pay the global market price for these commodities. The problem is that this creates dueling incentives for key actors. The political interests of the state in keeping domestic prices low is at odds with the commercial interests of palm oil producers and exporters, who want to sell as much palm oil as they can at the highest price the market will support. Something has to give, and clearly the government believes that palm oil companies chasing export profits are diverting supply away from the domestic market where profit margins are lower. This has caused the price of cooking oil to surge, and shortages and hoarding were widely reported earlier this year. To bring the price down, the government enacted a blanket export ban.


Exploring Palm Oil Alternatives in Latin America

Commercial oil palm cultivation in Colombia began in 1945 when a U.S.-based company established a plantation in the banana zone of the Magdalena department. Following the economic liberalization of Colombia’s economy in the 1990s and then the 2002 election of former President Alvaro Uribe, the palm oil industry began a trajectory of rapid growth over the next 16 years.2


The profitability of oil palm crops in the tropical climates of Latin America and the Caribbean is drawing increasing interest. In 2019, the region accounts for 6.2% of global palm oil production (Expert Market Research, 2019). At the same time, some countries within the region rely on palm oil import to fulfill their growing demand.


1. Palm Oil Production

Total palm oil export by Latin America and the Caribbean attained a value of USD 1.59 billion in 2019 (Statista). Two years earlier, that value was equivalent to USD 1.33 billion. Colombia has the highest value of palm oil exports with exports equivalent to USD 446 million, followed by Guatemala with a value of USD 440.74 million.3


2. Regions Producing Palm Oil

Colombia is the largest palm oil producing country within Latin America and the Caribbean, producing around 1.6 million MT annually and contributing 2% to global supplies (Food Navigator, 2018). The area planted with palm oil trees in Colombia is around 541,000 hectares. The Netherlands is the main buyer of Colombian palm oil followed by Brazil, Spain, Mexico and Germany.


After Colombia, Guatemala has the second largest palm oil production in the region, at around 852,000 MT, with oil palm planted area extended to nearly 190,000 hectares. The Netherlands is the main buyer of Guatemalan palm oil, with exports reaching a value of over USD 171 million in 2019(Statista). Other export destinations of Guatemalan palm oil are Mexico, Germany and El Salvador.


In Ecuador, palm oil production has been growing since 2013. Production is expected to reach 630,000 MT by 2019, up from 580,000 MT produced the year before. Ecuador has the second largest oil palm cultivated area at around 246,000 hectares in 2019, down from 370,000 hectares four years earlier (Statista).  Ecuador’s main country of destination for palm oil export is Colombia, with an export value of around USD 146 million. Other export destinations include Mexico, the Netherlands and the US.


Brazil has an 180,000 hectares of oil palm planted area producing about 500,000 MT of palm oil, where Agropalma is one of the country’s largest palm oil business. Agropalma operates oil palm estates, mills and a refinery in Pará in Northern Brazil, where about 15% of its production is exported to the EU and US (Agropalma, 2017). Due to high local consumption, Brazil has to import palm oil mostly from Colombia, with imports reaching a value of more than USD 74 million out of USD 141 million of the total palm oil import value in 2019 (Statista).


Palm oil industry in Mexico is considerably smaller at 109,000 hectares of planted area and its palm oil production stood at about 140,000 MT (Statista). Mexico has to rely on import where it is the biggest palm oil importer within Latin America and the Caribbean. Palm oil is imported largely from Costa Rica, with imports hitting over USD 108 million out of USD 285 million in 2019.


3. Differences between Latin American and Southeast Asian Producers

Latin American palm producers strive to distinguish themselves from Southeast Asian producers, who have been widely criticized for the deforestation they have produced. In Latin America, palm oil production has doubled since 2001 and, unlike the Asian case where more than half of the expansion occurred as the result of converting forests to monoculture, most of the land where this expansion has occurred has already been deforested. A recent study by the University of Puerto Rico analyzing palm oil plantations in Latin America shows that 79% of the expansion of the crop in the region has been developed on previously deforested land, primarily pastures for livestock and other crops, while the remaining 21% has been developed on land with woody vegetation that includes but is not limited to forests.


The large majority of palm oil plantations in Latin America is in the hands of small and medium producers (less than 500 ha) unlike Southeast Asia where very extensive plantations (between 3,500 ha and 50.000 ha) belonging to large firms or government-owned companies predominate. Not only has this had an impact on the different patterns of the crop’s expansion in the two areas, it also makes the palm oil sector in Latin America a focus of attention for development institutions.



The tropical region of Latin America and the Caribbean represents the world’s largest forested area, with suitable conditions for growing African palm. For this reason, it is essential that growth in the production of palm oil be sustainable.4


Producing palm oil sustainably involves, for example, developing new palm crops in already deforested areas, applying good practices to increase the productivity of the crop, and obtaining environmental certifications increasingly demanded by consumers.


Aware of this challenge, Exporta Wholesale is committed to working together with Latin American producers of Palm Oils to support the global demand for palm oil, in lieu of Indonesia’s most recent export ban.


About Exporta Technologies

Exporta Wholesale is the largest marketplace connecting suppliers in Latin America with buyers in North America. Today, we have a network of over 5,000 Latin American suppliers serving a variety of consumer goods and product categories in the United States. 


Exporta’s marketplace offers buyers a full service experience in the origination, sourcing and managing of products. The platform was founded on the idea that curation and service are the most important elements in the buyer’s journey. Exporta’s marketplace is building technology that addresses the pains of sourcing products internationally at attractive prices.














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