Free on Board's Agri Headlines gives an outline of notable news in the agriculture space. For this week, we cover President Jokowi's export ban on Indonesian Palm Oil, the new FTA between Australia and India, and the growing Ecuadorian avocado market.
Tune into Episode 16 to learn more about the situation.
Want more agricultural insights? Get smarter and stay updated on the most important agricultural updates here.
0:00 Hey, thanks for stopping by.
0:02 This is free on board a podcast by Tridge.
0:05 You're in the right place
0:06 If you're looking to stay up to date with the latest food and agricultural news
0:10 now, onto the updates
0:27 [Bea] Welcome to Free on Board where we bring the most digestible agricultural updates to you weekly.
0:34 [Bea] I'm Bea a Global Market Analyst here at Tridge
0:37 [Ben] and I'm Ben also a Global Market analyst here.
0:39 [Bea] Yes, and today, we are covering Indonesia's export ban on palm oil
0:43 [Bea] the free trade agreement between Australia and India.
0:47 [Bea] And finally, the case of Ecuadorian avocados.
0:51 [Ben] Yep Bea, some amazing midweek stories for all our listeners, so let's get right into it
0:55 [Bea] For our first story,
0:56 [Bea] We are covering Indonesia's palm oil exports.
0:58 [Bea] Indonesia made not the fifth, No, not even the sixth, Ben.
1:02 [Bea] But the seventh policy changed since the start of the year, which is the most serious of them all.
1:08 [Ben] The volatility – tell me about the most recent policy announcement, Bea
1:14 [President Joko Widodo Speaking]
1:19 [Bea] that clip I just played – that's President Jokowi speaking on the fact that all exports of cooking oil will be banned starting April 28th,
1:27 [Bea] which was last Thursday. To note, Indonesia exports mostly processed palm oil, which falls under the scope of the ban.
1:35 [Ben] So I'm guessing that once this podcast is released it would have been approximately a week since the ban had been executed
1:40 [Bea] yep, you're right. It would have been approximately seven days.
1:45 [Bea] What's interesting about this policy is that there wasn't a particular termination date given with a new announcement.
1:51 [Ben] Are there speculations around how long this would approximately last.
1:55 [Bea] Not really.
1:56 [Bea] But there are assumptions that it could still very much be short-term.
2:00 [Bea] Many analysts believe that the ban was put in place to secure food oil supplies for the upcoming Lebaran festival in Indonesia,
2:06 [Bea] which will take place between May 1st and May 2nd and it could be lifted soon after.
2:11 [Ben] So it's an attempt to secure enough food oil for the festival.
2:15 [Ben] Help me understand the significance of the Lebron festival, Bea.
2:18 [Bea] Yeah, so as you know, Ben, 88% of the Indonesian population is Muslim.
2:23 [Bea] Lebaran is celebrated by Muslims worldwide because it marks the end of the month-long dawn to sunset fasting of Ramadan.
2:30 [Ben] Well, that makes sense.
2:31[Ben] It's truly a time for festivities.
2:34 [Ben] I'm also curious about its repercussions on the global market.
2:37 [Bea] Yeah, the impact of the announcement was definitely felt in the market, Ben.
2:41 [Bea] to give you some context, palm oil futures as traded on the Malaysian stock exchange are representative of global market dynamics.
2:49 [Bea] Despite Indonesia being the larger producer and exporter of the two countries.
2:54 [Bea] prices jumped 7% after the announcement on April 22nd but dropped again by 2% after it was clarified that CPO was excluded.
3:03 [Ben] That's interesting. Was that all that happened?
3:05 [Bea] nope, it wasn't Ben.
3:07 [Bea]So I'm glad you asked. On Wednesday, April 27, Indonesia reversed its position and stated that they would, indeed, also ban the exports of crude palm oil.
3:17 [Ben] What a sequence of events.
3:19 [Ben] I'm assuming that the market reacted to the reversal as well.
3:22 [Bea] Oh yeah it did.
3:23 [Bea] After the ban was announced, the Indonesian rupiah dropped to an eight-month low, as markets expected export earnings to decline.
3:30 [Bea] By trying to help its most vulnerable citizens by keeping palm oil in the domestic market, Indonesia might have inadvertently increased the cost of imports through the depreciation of its currency and might have created higher price hikes.
3:45 [Ben] This I feel is quite a common theme across particular global markets.
3:50 [Bea] In South Africa too, we're seeing massive price hikes in food oil and it's only expected to get worse.
3:56 [Bea] It really is, Ben.
3:57 [Bea] We also saw this, quite pointedly, earlier this year in Turkey when food prices rose to unforeseen levels.
4:03 [Bea] We discussed this in our first podcast episode.
4:06 [Bea] So if you're interested, please go check it out.
4:09 [Ben] Now for our 2nd story we're going to talk about the free trade agreement between Australia and India and how would it affect the Australian wine market.
4:16 [Bea] Okay wine expert – tell me more
4:19 [Ben] The free trade agreement between Australia and India was signed on 2 April 2022
4:23 [Ben] and it is set to reduce tariffs from 150% to 100% on Australian wine with CIF values over $5 per 750ml bottle.
4:35 [Ben] And on top of that for wines with ci values over $15 per bottle tariffs will decrease to 75%.
4:43 [Bea] That's actually really great news for Australia!
4:44 [Ben] Yep, that's great news because Australian wine exports to India has already been increasing by 72% in volume to 2.5 million liters
4:53 [Ben] and 81% in value to USD 8.7 million in 2021.
4:58 [Ben] And that's expected to increase significantly in 2022, due to the free trade agreement.
5:03 [Bea] Right. For background, how was the Australian wine industry doing prior to the agreement?
5:08 [Ben] Well, the Australian wine industry struggled heavily here in 2021
5:10 [Ben] losing 30% of its export value.
5:13 [Bea] 30%. How so, what happened?
5:16 [Ben] Well, on 26 March 2021, after several months of restrictions, China's government imposed tariffs ranging from 116% to 218% on bottled Australian wine imports, that will last till 2026.
5:31 [Ben] Now, this caused wine exports to China, which is Australia's biggest wine export market, to fall by 97% in value..
5:40 [Bea] Wow, what did Australia do with all the wine not exported to China?
5:44 [Ben] Well, the closing of the Chinese market left about 25% of the Australian wine grape crop without an obvious destination.
5:51 [Ben] Now, this caused Australia to stockpile quite a bit of the wine that it could not sell, which has put downward pressure on Australian wine prices, especially for red wine.
6:00 [Bea] Can you tell me why red wine prices are down more than white wine prices?
6:04 [Ben] Well, there's currently a high demand for quality dry white wines in the global market.
6:10 [Ben] So Australia is not struggling to find buyers for dry white wines, but this is not the case for dry red.
6:15 [Ben] There's currently an abundance of dry red in the market, and there's not an equivalent demand for that, which is driving Australian red wine prices down.
6:23 [Bea] I see, I understand.
6:25 [Bea] It seems like a case of high supply coupled with low demand for reds.
6:29 [Ben] Exactly.
6:30 [Ben] And this new deal with India would not replace the gap left by China, but it will help with diversification
6:35 [Ben] and it's a vital first step towards addressing the national oversupply of wine in Australia.
6:41 [Bea] For our third story, we have Ecuadorian avocados.
6:45 [Ben] I love avocados, but Ecuadorian? I don't think I've encountered Ecuadorian avocados in South Africa yet.
6:51 [Bea] Yeah, avocado is definitely considered a non-traditional agricultural export product in Ecuador, but it's seen as a product with high potential for cultivation and exports, 7:00 [Ben] I bet, especially with how the world has been raving about the fruit.
7:04 [Bea] You're right, Ben. Gotta to ride the tide while it's high.
7:06 [Bea] To give you a little more context
7:09 [Bea] In 2021, Ecuadorian avocado exports reached 600 tons
7:12 [Bea] which is a 175% increase compared to 2016.
7:18 [Ben] that's definitely riding the tide. Are there any forecasts ㅐㅜhow much the market will grow?
7:22 [Bea] Yeah, with active initiatives from the Ecuadorian government forecasts indicate that Ecuadorian Avocado could be exported yearly to at least 34 global markets and generate $360 million us dollars in export revenue.
7:35 [Ben] That's an ambitious and profitable growth.
7:38 [Ben] Can you get us started on the takeaways, please?
7:40 [Bea] Of course, Ben. Indonesia, the largest exporter of palm oil in the world, has enacted their seventh policy change, which bans all palm oil exports.
7:49 [Bea] Unfortunately, it seems that the policy which was intended to protect the domestic vegetable oil supply
7:53 [Bea] might have backfired. With expectations that export earnings would decline,
7:59 [Bea] the Indonesian rupiah dropped to an eight-month low, making all sorts of imports extremely expensive for Indonesians.
8:06 [Ben] And for our second story: The free trade agreement signed by Australia and India on 2 April 2022 is set to reduce tariffs on wine exports from Australia,
8:14 [Ben] which is expected to significantly increase the volume and value of wine exported to India.
8:21 [Ben] The new deal with India will help diversification and is a vital step towards reducing Australia's dependence on China for wine exports
8:27 [Ben] and addressing the national oversupply of wine.
8:30 [Bea] Lastly, Ecuadorian avocados: they are still considered somewhat of a newbie in the avocado market.
8:37 [Bea] The Ecuadorian avocado market is growing tremendously, with expectations that the fruit could be exported yearly to at least 34 global markets
8:45 [Bea] and that's all we have for you today.
8:48 [Bea] See you next week.
8:49 [Ben & Bea] Bye.
9:11 If you enjoyed this episode, please leave a review.
9:14 Subscribe and share our podcast.
9:16 Check out dot com forward slash intelligence dash data for more price analyses and up-to-date insights into the food and agriculture industry.