Aurelia Butler

Palm oil prices shot higher and the Indonesian rupiah lost ground on Monday after Jakarta levied a blanket ban on exports of the edible oil in a bid to contain surging food prices as a result of the war in Ukraine.The move by Indonesia, the world’s biggest exporter of palm oil, is the latest food export ban being implemented by countries around the world suffering from soaring food prices. “This is yet another reminder of the vulnerability present across agricultural supply chains in an environment of already historically tight inventories, compounded by the indefinite loss of Ukrainian export volumes and historically high production costs,” said Tracey Allen, a JPMorgan analyst in London.Agricultural commodity prices have jumped after exports from Ukraine, a leading grain and sunflower oil supplier to world markets, stopped due to the war.Benchmark wheat prices in Chicago have risen 21 per cent while corn has added 15 per cent, leading to higher food import bills for countries reliant on international markets for their grains.Vegetable oil prices have also shot up, with retailers in many countries starting to ration supplies. The UN Food and Agricultural Organization’s vegetable oil price index has surged 40 per cent this year.The tight vegetable oil market has forced retailers to start rationing cooking oil. Supermarkets in some European countries last month started limiting the amount of cooking oil customers can buy, while leading UK retailers such as Tesco and Waitrose followed suit over the past few days.Indonesian president Joko Widodo announced a total ban for outbound shipments of the oil on Friday. As markets reopened on Monday, palm oil traded in Malaysia jumped as much as 7 per cent to 6,800 ringgit a tonne before falling back to 6,217 ringgit.The Indonesian rupiah, which has been largely stable this year despite pressure on emerging markets from anticipated US rate rises, also dropped 0.7 per cent to 14,455 per dollar, marking the sharpest daily fall in half a year.Although the restrictions would probably bring down prices in Indonesia, they would drive up prices for importers, including India and China, said one analyst. “Clearly this is a negative for the global consumer.”The ban also spurred a sell-off for Indonesian palm oil producers, with Jakarta-listed Triputra Agro Persada falling about 7 per cent and rival Astra Agro Lestari down more than 4 per cent.Indonesia was already struggling with a domestic palm oil shortage before the invasion of Ukraine, piling pressure on the government to act as the world’s largest Muslim population prepares for feasting during the Eid al-Fitr holiday, known locally as Lebaran. Earlier this month, students took to the streets to protest rising inflation, as well as rumours that Jokowi, as the president is popularly known, would seek a third term.The export ban, which will take effect on Thursday, marks the latest protectionist move by Jokowi’s government, which had already introduced requirements that producers devote a portion of output to domestic markets and recently raised Indonesia’s palm export levy.Analysts said the new restrictions had been introduced ahead of Lebaran holiday in early May. “We believe the suspension would be lifted soon after the passing of the Lebaran festive period, as consumption demand is set to normalise thereafter,” said Lester Siew, an analyst at Citigroup.Additional reporting by Neil Hume in London More

And breathe. In the end it was a convincing victory by Emmanuel Macron against Marine Le Pen in yesterday’s French presidential election. Le Pen has moderated her positions a lot over the years (no more leaving the euro or indeed the EU, for example) yet still lost heavily. Today’s main piece sketches out what the result is likely to mean, given the influence of France on EU trade policy. Charted waters looks at what can be gleaned about the impact of the Ukraine conflict from last week’s unusually testy IMF meeting.We’ll always have ParisThe biggest laugh of the campaign for trade folks, admittedly in a contest that’s been short on globalisation-related giggles, was Le Pen’s assertion in last week’s head-to-head debate that Macron hadn’t stood up for French interests inside the EU and was too lax about allowing imports. That must have provoked hollow mirth from the Atlantic to the Black Sea and the Baltic to the Adriatic. France has always thrown its weight around in EU debates in general and trade in particular. With the UK gone, the influence of its instinctive interventionism has become increasingly clear.There’s the European Chips Act, driven through by hyperactive French internal markets commissioner Thierry Breton, which hurls money at the EU semiconductor industry in a revival of old-school industrial policy. There’s the carbon border adjustment mechanism (CBAM), which threatens to block imports from relatively emissions-intensive producers. There’s the proposed “mirror clauses” which aim to force trading partners to adopt EU farming standards in order to be able to export to Europe. And most of all there’s the “anti-coercion instrument”, which will authorise the EU to block imports, procurement bids, inward investment and so on from countries whose governments try to bully the union or its member states. All bear the imprint of Paris, and all have raised concerns among more liberal-minded countries within the EU.Macron was evidently aware of some vulnerabilities to Le Pen’s charges and her assertion that France should drop its focus on the EU and seek to be a global power, working especially with former colonies in Africa. (Similar claims made by Brexiters about always losing battles in the EU were also largely wrong, and yet they and the Global Britain vision carried the day in the referendum.)The president had pretty solid answers ready to Le Pen’s accusations that the posted workers scheme for cross-border EU staff undercuts French labour standards (it’s been reformed), that trade deals cause environmental degradation (he’s stalled the Mercosur agreement because of Amazon deforestation) and that imports weaken farming standards (he specifically mentioned the mirror clauses).France holds the six-month rotating presidency of the EU council of member states, and Macron has used the opportunity to push through a bare-bones version of the CBAM earlier this year to have something to show by election time. He has also tried to neutralise accusations of betraying French farmers by putting bilateral trade deals with New Zealand and Australia on hold for the course of the presidency. This came sufficiently late in the process that the Kiwi prime minister Jacinda Ardern had to cancel a planned trip to Brussels rather than turn up and go away again empty-handed. So, a prepared defence and a bit of political manoeuvring to create some good optics. I’m no more a psephological expert on France than I could advise on New Zealand cattle farming: analysing the idiosyncrasies of French politics is strictly one for the pros. But I’d be surprised if trade shifted many votes from Macron to Le Pen, as opposed to more domestic concerns such as inflation and living standards. The hard right in France and elsewhere are often less rabid economic anti-globalisers than cultural nativists. (I’ll come back to this issue in subsequent Trade Secrets.)Accordingly I’d also be surprised if EU trade policy now changes much from before the campaign. The New Zealand and Australia trade deals will be unfrozen (the former more quickly than the latter) and the process of creating the anti-coercion tool and the CBAM — the latter much more slowly thanks to its legal and technical complexity — will continue. The EU is taking a more interventionist approach on trade, for sure. But we’re a long way from Le Pen’s wilder ideas of in effect dismantling the Single Market, breaking the union up into a loose association of independent states and thus ending the idea of a unified EU trade policy for good.As well as this newsletter, I write a Trade Secrets column for FT.com every Wednesday. Click here to read the latest, and visit ft.com/trade-secrets to see all my columns and previous newsletters too.Charted watersFinance officials are not known for their emotive language, but these are not normal times, as last week’s IMF gathering proved. US Treasury secretary Janet Yellen used the gathering in Washington to condemn Russia’s “illegal, unprovoked war against Ukraine”. She and her counterparts from the UK, the EU and Canada then walked out.It was up to Kristalina Georgieva, IMF managing director, to explain — as the above chart illustrates — that the net effect of the conflict will be damage on the entire global economy. Russia’s invasion had been a “massive setback” for the global economy, Georgieva said, as the fund published sharply lower forecasts for 2022 from the 4.4 per cent estimated as recently as January to 3.6 per cent. None of this was surprising, at least to FT readers. Martin Wolf explained last month how the world is now at risk of moving into two economic blocs with damaging economic and security consequences.As with so many economic hardships, it will be the poor that suffer the most. The IMF’s fiscal and financial stability departments warned of debt distress among poorer countries as they faced a perfect storm of increasing inflation, lower growth and higher US interest rates. (Jonathan Moules)Trade linksBoth the European Commission president and the UK prime minister have been in India in the past few days, talking up chances for co-operation on trade and technology.Treasury secretary Janet Yellen revealed the limits of US economic aggression towards Russia by cautioning European countries against a full embargo on Russian oil and gas.Research from the shipping company Flexport looks at the cost of trucking and concludes that high prices may be due for a downturn.In the light of protests about the soaring cost of food, pushed higher by the war in Ukraine, two academics look at the history of food riots. A piece in Foreign Affairs argues that the EU has done better at integrating its single market than the US. One of my most treasured colleagues at the FT, David Gardner, has sadly died. Here’s his beautifully written obituary. More

AMSTERDAM (Reuters) – Europe’s biggest port Rotterdam said that goods throughput fell by 1.5% in the first quarter as trade was hit by the impact of sanctions on Russia, and it expects the conflict in Ukraine to hit volumes for the full year.In 2021, 30% of oil imports via Rotterdam were from Russia, while 25% of its liquefied natural gas imports came from Russia and 20% of coal that arrived in the Dutch port.The Port of Rotterdam said it was too early to judge how much volumes from Russia had fallen but “by now in virtually all sectors the impact is visible from the sanctions and the decisions by individual companies not to do business with Russia.”The port said that falling container volumes to Russia had become apparent in March as most shipping companies stopped taking Russian container bookings, and most deep-sea terminals had halted exports as well.Russian oil, coal and gas are not yet subject to European sanctions, but some companies, including Shell (LON:RDSa), have stopped or slowed doing business with Russian companies voluntarily and ahead of likely further sanctions.The port said that 113.6 million tonnes of goods in total were transhipped via Rotterdam in the first quarter of 2022, down from 115.2 million in the same period of 2021.”We expect that the developments in Ukraine and the greatly worsened relationship between Russia and many other countries will impact throughput volumes in the rest of the year as well,” Port of Rotterdam CEO Allard Castelein said in a statement.The loss of trade with Russia was partly offset by rising trade elsewhere. “Since March, oil companies are taking less oil from Russia,” the port said, noting that the overall volume of raw oil imported had remained almost flat at 25.5 million tonnes.LNG imports jumped 78% in the first quarter from a year earlier to 2.7 million tonnes.The port noted that high prices had hit German steel production, contributing to a 20% fall in iron ore imports.Disruptions to trade from China due to lockdowns there also posed a risk.”In the first quarter the consequences of the COVID lockdowns in Shanghai were not yet visible in Rotterdam,” the port said. More

KUALA LUMPUR (Reuters) – Countries should pause or slow use of edible oil as biofuel to ensure adequate supply for use in food, a state-backed Malaysian palm oil group said on Monday, warning of a supply crisis following an Indonesian ban on palm oil exports. Indonesia, the world’s top producer and exporter of the edible oil, sent shockwaves through the market on Friday when it announced it would impose a ban from April 28.Global edible oil supplies were already choked by adverse weather and Russia’s invasion of Ukraine, and now global consumers have no option but to pay top dollar for supplies.Disruption from conflict has exacerbated price rises in food commodities, which were already running at 10-year highs in the Food and Agriculture Organization’s index, threatening a jump in global malnourishment.”Exporting countries and importing countries need to have their priorities right, this is the time to temporarily reconsider food versus fuel priorities,” said director general of the Malaysian Palm Oil Board Ahmad Parveez Ghulam Kadir.”It’s very important for countries to ensure available oils and fats are used for food and … temporarily stop or reduce their biodiesel mandates,” he said, adding countries could resume biodiesel mandates once supply normalises. Palm oil, the most widely used edible oil, is also used as biodiesel feedstock. Indonesia and Malaysia make it mandatory for biodiesel to be mixed with a certain amount of palm oil – 30% and 20% respectively – and just last month said they remain committed to those mandates, despite higher palm prices.Other countries also make biofuels from animal fats and plant oils like corn and soy, and imposed mandates. Demand for such biofuels has boomed from climate change mitigation efforts.Malaysia accounts for 31% of global palm oil supply, second after Indonesia’s 56%.Although Malaysia is expected to benefit from Indonesia’s drastic policies, producers face a pandemic-induced labour shortage and said they cannot fill the global supply gap.Malaysia also needs to look at its stock and production forecast to ensure local demand is not neglected while fulfilling global demand, Ahmad Parveez said. SELLERS’ MARKETInvestors have been anticipating Malaysia would bring in tens of thousands of migrant workers to staff plantations and boost production. However, the Malaysian Palm Oil Association (MPOA) said the influx of workers would raise production by only 1 million tonnes at most.”The reality is, we can increase our production but this still wouldn’t be enough to meet world demand,” MPOA Chief Executive Officer Nageeb Wahab said.The association, which represents plantation giants like FGV Holdings and Sime Darby Plantation, said Indonesia’s ban has added urgency to addressing the labour crunch and it would urge the government to accelerate recruitment.Indonesia’s ban is set to shift demand to Malaysia, making it a rare sellers’ market, Nageeb said. “We are in a very rare situation, I think this situation is going to be prolonged… The sellers get to decide who to sell to, and what product to sell whether crude palm oil or refined.” More