Indonesian export curbs to inflate palm oil prices, sunflower oil imports from Ukraine hit too

Crude palm and soybean oil are imported from mainly Malaysia, Indonesia, Argentina and Brazil; these items had shares of 62% and 21% in the total edible oil imports respectively.

Palm Oil Cultivation Oil Palm
 It depends on Ukraine for sunflower oil, which had a 14% share in the total edible oil import basket in 2020-21.

If India’s edible oil imports surged 43% to $20 billion in 2021-22, the shipments into the country could rise further in the current financial year and widen its merchandise trade deficit along with higher imports of crude petroleum and coal. 

Indonesia’s decision to ban the export of refined palm oil could push domestic edible oil prices up by 10-15% in the short term, according to trade sources.

The Indonesian agricultural ministry on Monday had clarified that crude palm oil shipments would be excluded from the ban, even as an export tax is levied on such shipments.

A ban on crude palm oil could have impacted India much more as India meets 85% of its requirement of crude palm oil via imports, and the bulk of the imports are from Indonesia and Malaysia.

India imports more than 55% of its edible oil consumption annually either in crude or refined form.

Sunflower oil imports from Ukraine have already been hit due to the Ukraine-Russia war.

According to Sandeep Bajoria, chief executive of Sunvin Group, a Mumbai-based vegetable oil brokerage and consultancy firm, out of India’s imports of 7.2 million tonne (MT) of palm oil annually from Indonesia and Malaysia in 2021-22, 5.4 MT was crude palm oil.

Indonesia however has now banned exports of refined, bleached and deodorized (RBD) palm oils.

BV Mehta, executive director, of Solvent Extractors Association of India, said that if export prices rise, domestic prices also move up in tandem. On Monday, palm oil futures for July delivery surged 6% to a six-week high of 6,738 ringgit ($1,550) a tonne in Kuala Lumpur. Malaysia and Indonesia account for more than 90% of the total palm oil trade.

The Indonesian government had imposed around $ 575 per tonne as an export levy on all palm oil and they are also mandating a 30% blend of palm oil being diverted into biodiesel.

“Domestic consumers need not panic on the intermediary price rise as Indonesia has now clarified its position on a complete ban on the export of palm oil,” Varun Chaudhary, managing director, CG Corp Global said.

On the domestic front, for curbing prices, the government has abolished the basic import duty on crude edible oil till September 30, 2022. The rate of import duties on refined palm oils (12.5%), refined soyabean oil and refined sunflower oil (17.5%) till September 30, 2022.

According to industry estimates, the domestic consumption of edible oil is around 22.5 MT annually out of which 9 – 9.5 MT is met from domestic supplies and the rest from imports.

Crude palm and soybean oil are imported from mainly Malaysia, Indonesia, Argentina and Brazil; these items had shares of 62% and 21% in the total edible oil imports respectively.

 It depends on Ukraine for sunflower oil, which had a 14% share in the total edible oil import basket in 2020-21.

India’s significant import dependence on edible oils started in the late 1990s when the imports were just 1.7 MT which rose to 5 MT in 2007-8. After that, there has been a constant rise in imports, in sync with the rise in domestic demand from an emerging middle class.

Domestic production of the oilseeds hasn’t kept pace with the consumption demand; output fluctuated between 24 MT and 32 MT between 2005-06 and 2018-19. Production is estimated to be at an all-time high of 37.14 MT during the 2021-22 crop year (July-June), according to the Union agriculture ministry.

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