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Malaysia's Palm Oil Board Urges Countries to Reconsider Food Versus Fuel Priorities

FILE - A worker holds palm oil fruits while posing for a picture at an oil palm plantation in Slim River, Malaysia August 12, 2021. Picture taken August 12, 2021.

KUALA LUMPUR, Malaysia — Countries should pause or slow down the 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, which is the world's top producer and exporter of the edible oil, on Friday said the ban will commence on April 28, in a shock move that could inflame surging global food inflation and constrain supplies.

Global edible oil supplies were already choked by adverse weather and Russia's invasion of Ukraine, and now consumers around the world will have no option but to pay top dollar for supplies.

"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 that countries could continue their existing biodiesel mandates once supply returns to normal.

Palm oil, the most widely used edible oil, is also used as a biodiesel feedstock.

Indonesia and Malaysia have made it mandatory for a certain amount of palm oil to be used for biofuel, 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. Demand for such biofuels has boomed in recent years due to climate change mitigation efforts.

Malaysia, which accounts for 31% of global palm oil supply, is the world's second largest producer of palm oil after Indonesia, which makes up 56%.

Producers in Malaysia are facing a pandemic-induced labor shortage and said they cannot meet the gap left in global supply by Indonesia's ban.

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.

Following Indonesia's announcement, Chicago soy oil futures BOcv1 surged to their highest since 2008 while crude palm oil futures FCPOc3 rallied to their highest in six weeks.