Perhaps for the first time in recent history, a pandemic has played a crucial role in determining the prices of edible oils and their consumption pattern among the population.
The initial months of Covid-induced global lockdown, had led to a demand destruction in edible oils. Earlier this year, the market participants expected prices to reach historical lows during 2020. Contrary to this, prices gained momentum. Several global factors determine the prices in edible oils as the country imports around 70 per cent of its requirements.
India imported around 13.2 million tonnes (mt) of edible oil during the oil year 2019-20 (November, 2019 to October, 2020). Palm oil is usually imported from Indonesia and Malaysia, soya oil from Argentina and Brazil, and sunflower oil from Ukraine, Russia and Argentina.
Of the total imports, palm oil (which includes RBD palmolein and crude palm oil) garnered a majorshare at 7.21 mt during the period.
The average import price of crude palm oil (CPO), which reached a low of $558/tonne in May, increased to $873 in November. The average import price of crude soyabean oil increased to $991/tonne in November from a low of $664 in April. Crude sunflower oil reached $1,148/tonne in November from $723 in March.
Experts claimed that the depleting stocks of the edible oil in the producing and consuming countries, and the infusion of liquidity by various economies during the pandemic led to the strengthening of prices in the global market. Additionally, China was also aggressive in building edible oil reserves at that time.
Spot market price of CPO recorded a growth of 56.72 per cent at ₹951 per 10 kg in December from a low of ₹606.8 for 10 kg in May. RBD palmolein’s spot market price recorded an increase of 51.52 per cent to ₹1,021 in December from ₹673.8 for 10 kg in May.
Refined soya oil went up to a high of ₹1,181.25 for 10 kg in December from a low of ₹799.8 in March, recording a growth of 47.73 per cent.
The year 2020 started with the government placing the RBD palmolein under the ‘restricted list’ category on January 8 and allowed import subject to licence. This helped India to bring down the import of refined edible oils from 20 per cent to 1 per cent in 2020. In November, only a small parcel of 10,000 tonnes of refined oil was imported as against 1,22,409 tonnes in November 2019.
Edible oil consumers made a significant shift to soft oils such as soyabean oil, sunflower oil, mustard oil, etc. Palm oil witnessed a huge demand destruction with the pandemic-induced national lockdown shutting the HoReCa (hotels, restaurants, catering) segment.
The HoReCa demand was substituted by the household segment which preferred soft oils. Imports of soft oil increased to 5.95 mt in the oil year 2019-20. This included 3.38 mt (3.09 mt) of soyabean oil and 2.51 mt (2.35 mt) of sunflower oil. During the oil year 2019-20, the share of soft oils in the total import of edible oils increased to 45 per cent (37 per cent).
According to the databank of Solvent Extractors Association (SEA) of India, the total production of oil seeds was estimated to be at 36.46 mt during the oil year 2019-20. Of the estimated 28.17 mt of marketable surplus of domestic oilseeds, the total oil availability was estimated to be at 8.54 mt. Soya and mustard oils contributed a significant share in domestic oil availability.
Speaking at the Indonesian Palm Oil Conference recently, BV Mehta, Executive Director of SEA, said that the late rains affected the output of soya and groundnut crops despite good planting in summer. However, the crop output this year is higher as compared to last year. Due to better realisation in rapeseed/mustard crop, the planting is expected to be higher by 10-15 over the last year, he added.
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