Industry faces key global pressures from Indonesia’s concerning palm oil export ban

The surprise decision by authorities in Indonesia last weekend to ban exports of palm oil could well have major implications for some of the biggest manufacturers within the confectionery sector.

As anyone who has read our magazines or website over the past couple of years will have seen, lingering concerns have remained over the ingredient’s use within a number of segments including biscuits and chocolate markets.

It is therefore of critical importance for a number of food categories, with Indonesia reportedly accounting for 56% of global palm oil exports, with an annual value last year of $28 billion according to Statista, yet it has not been without its controversies.

Clearly, its industry-wide use is a complex issue that attracts passions on both sides of the debate – from campaigners who believe that nothing short of an outright ban is all that is acceptable on environmental grounds, through to those who believe that it is entirely possible to utilise palm oil in a genuinely sustainable manner.

Advocating for the latter position, Ferrero has been among those leading corporations placing a strong emphasis on traceability within its supply chains, as has been seen by the company being recognised by the WWF’s palm oil scorecard within the top three industry performers in the sector. Mars was narrowly behind it in registering a strong performance, with Hershey also among the ten best rated businesses operating within the sector.

While the report offered some encouraging signs for general standards, the latest drama unfolding in Indonesia has truly global ramifications in light of a combination of other significant factors. It is perhaps understandable that authorities in the Southeast Asian nation have moved to try and stem spiralling domestic product costs, against a backdrop of soaring oil (and wider ingredient) prices in recent months.

Most notable among the pressing related issues is the ongoing conflict in Ukraine, which has been a core supplier of sunflower oils – which has been severely impacted in Kyiv since Russia’s invasion that has had a major destabilising effect across many markets. This coupled with labour shortages reported in other major agricultural markets such as Malaysia, as well as drought conditions experienced in other areas of the world, have combined to create the perfect storm.

The knock-on effects of the present crisis are already being felt by consumers, with many stores in the UK rationing supplies of edible oils in light of the situation unfolding in Indonesia and around the world.

It remains to be seen how these damaging combination of factors will play out in the coming months and weeks ahead, but one thing is certain, resolution for all these issues cannot come soon enough to bring about some much-needed stability for the global food supply chains that are proving decidedly fragile.

Neill Barston, editor, Confectionery Production

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