Domestic Edible Oil Prices Likely to Remain Firm in Coming Months

Major edible oils such as palm oil and soybean oil have resumed the upward trend in recent weeks and the fundamental situation seems to be in favor of further rise.

The Malaysian palm oil market is currently supported from reports of increase in maintaining adequate stocks by the importing nations, especially by the leading consumer i.e. China, as the arriving shipments are facing quarantine measures against the COVID-19 threats.

Official statistics indicate lowering of palm oil stockpiles in Malaysia by 7.3% in the month of July, as against June month, to 1.5 million tonnes. Production on the other hand has fallen in the same month by 5.17% to 1.52 million tonnes. Likewise the exports had dropped by 0.75% to 1.41 million tonnes.

The corona pandemic has disrupted the labor force in Malaysia Harvesting has been affected adversely by labor shortage as oil palm estates are dependent on the migrant workers. As a result production continues suffering and may not recover in coming months as well. 

On the other hand, the consumption of soybean oil has improved because of the manufacture of biodiesel. Of the 250 million tonnes of soybean meal oil available globally, around 50 million tonnes have already been diverted towards producing biodiesel. As a result there is reduced availability of edible oils in the market.

Market Fundamentals Remain Positive: The inventories of vegetable oil inventories were already running tight globally. Earlier there were concerns regarding the influence of duty cuts, but the global market situation for edible oils is quite positive and since India meets more than half of the domestic requirements through imports, it is unlikely that reducing duty on the imports will have any negative impact this year.

The festivals are approaching and the unlocking process has started in different states. Therefore, the consumption outlook is improving once again. Also, the harvest season of soybeans is still far away. It is quite likely that we may see edible oil prices maintaining a firm trend for the next few months in the country.