GLOBAL EDIBLE OIL PRICES

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Context

The global edible oil prices have declined sharply because of improved supplies and may cool down domestic retail prices further.

Background

The United Nations Food and Agriculture Organization’s (FAO) food price index hit an all-time high of 159.7 points in March, the month immediately following the Russian invasion of Ukraine.
The supply of sunflower oil from Ukraine was disrupted because of its conflict with Russia.
The supply disruptions from Ukraine and Russia were aggravated by Indonesia’s restrictions on exports of palm oil in response to domestic price increases and drought in South America badly affecting the region’s 2021-22 soyabean crop.
Oil prices rose sharply in May 2022, when Indonesia — the world’s biggest exporter of palm oil — had imposed a ban on shipment.

Decline in prices

The decision by Indonesia to lift the ban on exports last month has improved global supplies. Besides, exports of crude sunflower from Ukraine have commenced using the Poland land route.
According to trade data, landed prices of palm oil, which has a share of more than 60% in India’s import basket, have declined by more than 33% to $1,150 a tonne, from the levels prevailing a month ago.
Similarly, the landed cost of crude soyabean and sunflower oils declined by 24% and 14% to $1,400 and $1,750 a tonne, respectively, in just one month.
According to department of consumer affairs data, modal retail prices of edible oils — mustard, soya, sunflower and palm oil — have declined in the range of 5-11% in the domestic market since June 1.
Edible oil makers have agreed to cut prices by `10-12 a litre in view of decline in global prices and the recent import tax cut.

Final Thought

India meets 56% of its annual edible oil consumption via imports and annual imports are 13-14 million tonne (MT). Around 8 MT of palm oil is imported from Indonesia and Malaysia, while other oils such as soya and sunflower come from Argentina, Brazil, Ukraine and Russia. The cooling of global prices will help in curbing inflation in India.