Palm oil prices soar, hit 6-week high on fears of supply constraint after Indonesia move
Premium- Many countries, including India, depend on imports of palm oil as a cheaper alternative to more costly soybean and sunflower oil
Palm oil prices continued to harden after Indonesia said that that it would halt exports later this month. Palm oil futures for July delivery surged 6% to six-week high of 6,738 ringgit ($1,550) a ton in Kuala Lumpur. Indonesia accounts for almost 60% of global palm oil supply. The ban threatens to further stoke global food inflation, which has been accelerating since the war erupted in Ukraine.
Many countries, including India, depend on imports of palm oil as a cheaper alternative to more costly soybean and sunflower oil. Indonesia will block exports from April 28 to tackle rising domestic prices. Easing COVID-19 restrictions have sparked a surge in demand for vegetable oils for food and biofuels.
India's 60 per cent of the edible oil requirement is met through imports while refined palm oil imports account for over 30 per cent of the country's total palm oil imports, In February, the Indian government cut its tax on crude palm oil (CPO) imports to 5% from 7.5%, as the world's biggest edible oil importer tries to rein in local prices of the commodity and help domestic refiners and consumers.
Analysts have flagged near-term pressure on both supplies and prices of products, including packaged foods and edible oils after Indonesia’s abrupt export ban on palm oil.
"The unorganized sector may face severe constraint but given the tough demand environment, listed players face earning risks on demand and margins—Hindustan Unilever Ltd (HUL), Godrej Consumer Products Ltd (GCPL), and packaged foods have the highest exposure," analysts at Jefferies said in a note on Sunday.
According to industry data, vegetable oil imports rose 13% in March to over 11 lakh tonnes on higher shipments of edible oil. Import of vegetable oils (comprising edible oil and non-edible oil) in March 2022 stood at 11,04,570 tonnes as compared to 9,80,243 tonnes in March 2021, the Solvent Extractors' Association of India, said.
While edible oil imports increased to 10,51,698 tonnes in March 2022 from 9,57,633 tonnes in the year-ago period, the imports of non-edible oil rose to 52,872 tonnes from 22,610 tonnes during the period under review.
The overall import of vegetable oils during first five months of oil year 2021-22, November 2021-March 2022, reported at 57,95,728 tonnes compared to 53,75,003 tonnes during the same period of last year. (With Agency Inputs)
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