The Indonesian ban on palm oil exports thankfully proved short-lived, as the government had to cave into the farmers’ demand to restore exports. The desired outcome of reduced prices was always going to be better achieved with smoother global supply, especially when other competing edible oils face a supply crunch, due to the ongoing Russian-Ukraine war.

As things stand, palm oil has wiped out the entire gains of 2022, as the last 20 trading sessions have wreaked havoc. Palm oil lost 10 percent in one trading session earlier this week, taking the weekly loss to 22 percent. It now sits at a 6-month low, down from the unprecedented highs of Malaysian Ringgit 8100 per ton, three months ago. From that high, the prices have come down crashing to nearly 4,700 per ton – with more downside pressure expected in the coming weeks.

Two fundamental shifts have happened in the past 20 days. One is the Indonesian government’s reversal of the export ban, as it failed to yield the desired results in terms of reduced prices at domestic level. Indonesia is by far the single largest supplier of palm oil across the globe, and even a 10-day absence from the market, sent panic signals.

Ukraine’s restricted access to export market for its sunflower oil also meant demand for palm oil remained high. But the last 10 days seem to have kicked in bearish sentiments across commodity markets, and the super cycle may well be just beginning to make a U-turn. Recall that the palm oil prices had risen faster than other non-edible commodities, and the downside too, is expected to be swifter.

The recession considerations are gaining traction every passing day, and that should mean a considerable hit to global pal oil demand. Close industry watchers are now expecting the demand from Asian countries to go down in double digits in the second half of 2022, which should keep a check on prices.

For Pakistan, the palm oil price correction could not have come at a better time, as it is faced with rising trade deficit and soaring inflation. While the non-food inflation will continue to rise unabated for much of 2022, there could be some respite in palm oil prices at home. Recall that palm oil has of late constituted more than two-fifth of the food import bill, with the yearly palm oil import bill expected to cross $3.6 billion – easily the highest-ever in the country’s history.