International prices of edible oils will generate more tailwinds for refined oil prices

India is one of the largest importers of edible oil/oilseeds in the world. FAOSTAT database of the United Nation’s Food and Agricultural Organisation (FAO) shows that India had a share of 0.9% in total vegetable oil and fat imports in the world in 1961. This increased to 12% in 2019, the latest period for which data is available.

This import-dependence has two downsides. One, it deprives Indian farmers of lost income opportunities which go to foreign producers. Two, it makes Indian consumers vulnerable to international price spikes in the edible oil market, which have risen sharply in the post Covid-period. The (edible) oil component of FAO’S Food Price Index was at 77.8 in May 2020. This has increased to reach 138.8 in January, the highest value since May 2012. The sharp rise in prices is a result of production shocks in many EDIBLE OIL INDEX IN FAO FOOD PRICE INDEX 200

150

100 important oil producing countries.

“The index’s eighth consecutive monthly increase mainly reflected higher palm, soy and sunflowerseed oil prices. With palm oil production in both Indonesia and Malaysia turning out lower than expected due to excessive rainfall (and, in the case of Malaysia, continued shortages in migrant labour force), international palm oil quotations climbed to eight-and-a-half year highs. Meanwhile, international soyabean oil prices rose for the eighth month in succession, fuelled by reduced export availabilities and prolonged strikes in Argentina. As for sunflowerseed oil, continued rising prices stemmed from lingering global supply tightness owing to sharply reduced 2020/21 sunflowerseed harvests” the FAO website says.

Food price index

Edible oil price index