Opinion

[TRIDGE Trend Analysis: July W2] - Indian Palm Oil Prices Rise Despite Loosening of Import Restrictions

RBD Palm Oil
India
Published Jul 18, 2021
TRIDGE’s Weekly Trend Analysis tracks patterns in traffic behavior, giving insight into notable events in the agricultural industry weekly. According to data from Week 2 of July, traffic for palm oil showed an increase in Indian prices.



*MA7: 7-day (Monday to Sunday) moving average

*Upper bound / Lower bound: (+)(-) 3 standard deviations from the moving average

*Anomaly: Traffic points that go beyond the upper / lower bound

During the last week of June, India removed import restrictions on refined palm oil (RFO) till 31 December. The crude palm oil (CPO) import tax was also cut by 5%. This was done as a way to reduce local prices that have risen by close to 100% in the past year, affecting consumers already impacted by rising fuel prices and low incomes following the effects of COVID-19. This is also expected to increase the availability of edible oil in the domestic market. The country meets about two-thirds of its domestic edible oil demand through imports while the portion of palm oil is about 60% of India’s total vegetable oil imports. In recent months, increasing sunflower oil prices have discouraged its import. India imported 1.27 million tonnes of sunflower oil during the first half of this year, compared to 1.64 million tonnes in the corresponding period last year. The CIF price of crude sunflower oil was USD789/tonne in May 2020 and by May this year, it had surged by more than 100% to USD1,609/tonne in May this year.

Prices rise despite the import tax cut

According to the Solvent Extractors’ Association of India (SEA), despite the Indian government cutting the import tax and permitting imports of RFO, palm oil prices have increased by about 6%. Domestic prices have been pushed up by the rise in overseas palm oil prices in anticipation of a surge in demand from India, the largest global palm oil importer. This rise in palm oil prices may suppress Indian demand and push the government to desist from further import tax cuts, as the rise in prices signaled the limitation of duty reduction.



Following the CPO import tax cut by India, Malaysian palm oil futures increased by 9%. According to the SEA, the price of CPO in India has risen to USD1,085/tonne from USD1,020/tonne on June 29, 2021. The prices of RFO increased to USD1,055/tonne from USD1,020/tonne. Therefore, it is unlikely that India will restore the previous duty structure as domestic prices remain high despite the lower import levy.

Indian edible oil Imports decrease

Indian palm oil and soybean oil imports dropped by almost 25% in June compared to the previous month, due to oil refiners postponing purchases expecting the cut in the import tax. According to the SEA, June palm oil imports in India fell to 587K tonnes, a reduction of 24% month on month. The country also witnessed a decrease in soybean oil imports in June (206K tonnes), a reduction of 23% month on month. Meanwhile, sunflower oil imports remained steady at 175K tonnes. Malaysia and Indonesia are the main suppliers of palm oil to India, while Argentina, Ukraine, Russia, and Brazil supply the country with soybean oil and sunflower oil. In July, palm oil imports are expected to rise to 750K tonnes due to buyers purchasing at an increased pace.

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