Sunflower Oil set to Drive Growth on India’s Edible Oil Imports

Published 2021년 11월 10일

India’s vegetable oil imports are forecasted to rise to 14M MT in the MY 2021/22, which will go from November 2021 to October 2022, mainly driven by a significant increase in sunflower oil imports. Sunflower oil imports are expected to rise to 2.4M MT from about 1.88M MT imported on MY 2020/21. The increase will be driven by a steep cut in import duties combined with a global increase in sunflower oil production that will reduce prices bringing them closer to palm and soybean oils. After a bumper MY 2020/21 in which oil prices skyrocket mainly due to production shortages, the Indian government is taking action to keep domestic food inflation in check.

India is the largest importer of vegetable oils in the world and through all this past year it has continuously reduced its import tax on edible oils. The tax cuts are a direct response to the rise of international prices that have caused food inflation in India for the entire past year. However, despite previous import tax cuts, the country has significantly decreased its import volume for palm oil, soybean oil, and sunflower oil over 2020/21 MY.

Import Duty Keeps Reducing Gradually

India has cut its import duty on edible oil for the third time after previously announced tax reductions on Crude Palm Oil, Crude Soybean Oil, and Crude Sunflower Oil. The last import duty cut was announced on October 13th in which the basic import duty was reduced to zero from the previous 2.5%. Consequently, the total duty for imports of Crude Sunflower Oil was reduced by 5%, the same as Crude Soybean Oil, and the total import duty for Crude Palm Oil was reduced to 7.5%.In addition, the basic duty for all Refine Oils was also reduced as well to 17.5% from the previous 32.5%.

The continuous duty reductions over the past year are a clear sign that the country has adopted this measure as the main action to control international prices. However, global prices have remained on a higher trend for most edible oils. According to Nidhi Kumari, Tridge’s representative in India, importers are doubtful that these reductions will have an immediate effect. Ms. Kumari reported in mid-September that high global prices have slowed down edible oil imports.

Sunflower Oil Price in the Down Trend

The FAO Vegetable Oil Price Index averaged 184.8 points in October, which represents an increase of 16.3 points (9.6%) compared to the previous month and the highest level ever. However, in the case of palm, soybean, and sunflower oils prices, the Index reported that these have been supported by a revival in global imports, especially from India. On the other hand, global sunflower oil prices have decreased in the last two months and are expected to remain on the downward trend for the remainder of the year.

Source: International Monetary Fund

While palm oil is still the cheapest for its price advantage at origin markets, the sunflower oil price has become more competitive. According to Standar&Pours Global Platts, as of November 1st, the FOB Black Sea Ukraine for sunflower oil was USD 1,370 per MT, while for crude palm oil, FOB Indonesia was at USD 1,347 with a price difference of USD 22.5 per MT. The price difference between the two oils a year ago was USD 202.5 per MT.

In terms of prices at the destination, according to the Solvent Extractors’ Association of India, the average cost of imported crude sunflower oil on October 29th was USD 1,460/MT in Mumbai, while crude palm oil was USD 1,455/MT. Thus, sunflower oil commands a slightly higher price in the domestic retail market than palm oil. Additionally, the sunflower oil price has benefited from the recent announcement of an expected record volume production in Ukraine and Russia for 2021/22 MY.

A Strong Recovery of Production for MY 2021/22

Besides a favorable price scenario for Indian importers, another aspect favoring sunflower oil is the optimistically expected recovery in the major producing countries. According to UK Agro Consult, the projected global Sunflower seed production for MY 2021/22 is at 56.5M MT, up 6.5M MT from the previous year. Ukraine, India’s primary supplier of sunflower oil, is expected to produce a record volume of 7.1M MT, a 23% increase from MY 2020/21. In addition, Russia and Argentina are also forecast to increase their sunflower seed production. Along with Ukraine, the three countries account for 98% of India’s import volume.

The upward trend of the price that has been seen for the past year was based on the limited volume of crude sunflower oil produced, as processors faced difficulties with sunflower seed purchases. The oilseed supply was weak as global production got a delayed harvest campaign amid unfavorable weather conditions. The recovery of the main producing sunflower seeds countries will provide a better outlook for the commodity price for MY 2021/22.

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