“The prices (of edible oils) have risen from Rs 125 to about Rs 170-180 in just a month’s time… and they will skyrocket further in May or June. The extent of further price increases will depend on many factors… but it certainly won’t be a small increase,” said Shammi Agarwal, MD, Pansari Group.

Rising edible oil prices could reach new highs in the coming days if the war in the Black Sea region is not contained quickly. Domestic edible oil prices have risen 25-40 percent in the past month, according to industry players and experts. The war between Russia and Ukraine has dealt a triple blow to stocks of sunflower oil, palm oil and soybean oil. Pressure on the supply of sunflower oil from Ukraine has put further pressure on Indonesia’s export policy, affecting palm oil imports; it has also exacerbated concerns about crop loss in South America, impacting soybean oil supplies.

“The prices (of edible oils) have risen from Rs 125 to about Rs 170-180 in just a month’s time… and they will skyrocket further in May or June. The extent of further price increases will depend on many factors… but it certainly won’t be a small increase,” said Shammi Agarwal, MD, Pansari Group. India is a net importer of edible oil and depends for more than fifty percent of its cooking oil needs on imports from countries such as Ukraine, Argentina and Indonesia.

“The recent spikes in edible oil prices are unlikely to last for an extended period of time, as the demand for edible oils will deteriorate at higher price levels. However, if the war situation in the Black Sea region threatens to become serious, we could see edible oil prices reach new highs in the coming weeks,” Ravindra V Rao, chief of commodities research at Kotak Securities, told FE.com. “Until the situation between Russia and Ukraine does not improve, we expect edible oil prices to trade within a certain range for the foreseeable future,” he said. “Countries that depend on foreign supplies for edible oils, such as India, are susceptible to the heat of boiling edible oil prices in the international market,” he added.

Edible Oil Stocks in India: Imports vs. Domestic Products

Dive deeper: why and how a war in Ukraine is hurting India’s edible oil users more than other countries

India more dependent on edible oil imports from the Black Sea region

Although India is self-sufficient in almost all food products, edible oil remains an exception. Over the past five years, the oil seed production capacities in India have improved, but it is still not enough. Of the 19 kg of edible oil consumed annually by a person in India, more than 11 kg comes from imports, according to JK Arora, president of Tradology, a global market for B2B agri products.

“The war has led to an immediate cessation of sunflower oil supplies, which has led to a surge in demand for other types of edible oils such as palm oil and soybean oil, which themselves saw a mismatch between supply and demand before the war. This has led to a price increase of approximately 40 percent for palm oil and soybean oil. Prices of all types of edible oil are expected to rise in the near future,” said JK Arora. The long-term price outlook will only become clearer when we know the fate of the war and, most importantly, its consequences. for Ukraine and Russia, he added.

The current consumption of edible oil in India is about 22 million tons, of which 13 million tons or about 59 percent is imported, according to BV Mehta, executive director of Solvent Extractors’ Association of India. India imports 8 million tons of palm oil from countries such as Malaysia, Indonesia; 3.5 million tons of soybean oil from Argentina, Brazil and the US, and 2 million tons of sunflower oil from Ukraine, Russia and Argentina.

Double blow: Sunflower oil shortages from the Black Sea, Palm oil crunch from Indonesia

Palm oil makes up more than 60% of India’s total edible oil imports, followed by soybean oil and sunflower oil.

Where Does India’s Edible Oil Come From?

On the one hand, India is directly affected by the crisis in Ukraine regarding its sunflower oil stocks, as 90 percent of total sunflower oil imports come from Ukraine and Russia. “Market pressure and increased demand for U.S. sunflower oil (seasonal and subject to agricultural production restrictions) from other countries has caused prices to skyrocket due to limited supplies available. This is not expected to decrease in the near term as sunflower is a seasonal crop that is sown in April/May to be harvested in September/October in the Black Sea region,” said Veena Giridhar Gopal, founder of salesBeat, a supplier of sales intelligence in FMCG. †

On the other hand, palm oil, the largest imported edible oil, has seen its prices rise from the start of the year. Palm oil imports have also been particularly affected by trade sanctions imposed by the Indonesian government. The oil would be a cheaper alternative, but in recent days, with increased demand, it has become the most expensive oil for the first time, according to JK Arora, president of Tradology.

When will the shortage of edible oil decrease?

“Currently, shortages (of palm oil) are related to supply-side issues from Indonesia, where the government has said palm oil producers must sell 30 percent of their products on the local market, up from a previous quota of 20 percent. That’s why only 70 percent is allowed to be exported,” said BV Mehta of the Solvent Extractors’ Association of India. “The delay in issuing export licenses resulted in less supply, while on the other hand ships are waiting to load and the tank tanks in factories are full,” he added.

A global supply chain tightness for all three major edible oils (sunflower oil, palm oil, soybean oil) could lead to a global edible oil crisis in the coming months, said JK Arora of Tradology. “Palm oil futures in Malaysia hit new record highs in several months last year and every month so far in 2022. Production problems at the main soybean oil exporter Argentina have also put stress on traders of both vegetable oil and raw soybeans. the export of palm oil from Malaysia and Indonesia, the damage to soybean cultivation in Argentina and the war in Ukraine will lead to a global crisis for edible oil in the coming months.”

Unexpected winner of higher frying oil prices – Indian farmers

BV Mehta said that despite the shortages of sunflower oil, which account for 9 percent of the total consumption of edible oil, India will not experience shortages of edible oil as there are plenty of alternatives available. In fact, it will benefit Indian farmers. Indian farmers can benefit from higher prices for their products.

Farmers get a price that is higher than the MSP (Minimum Support Price) for their products. According to an Indian Express report, Indian farmers will realize good prices for their mustard crop to be harvested from mid-March. In the last week of February, mustard traded in the mandis of Rajasthan at Rs 6,700-6,800 per quintal, well above the government minimum support price of Rs 5,050. High prices should also encourage farmers to increase groundnut, soybean and sesame acreage in the coming kharif season, the report said.

This post Amid war in Ukraine, India prone to boiling edible oil prices was original published at “https://www.financialexpress.com/market/commodities/edible-oil-prices-may-rise-more-hit-new-highs-after-jumping-25-40-percent-as-ukraine-war-chokes-supplies/2462901/”


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