India’s edible oil imports have skyrocketed! Explore the intriguing factors driving this record-breaking trend.
India has achieved a remarkable feat in the import of edible oil by importing an astonishing 18.52 lakh tonnes in August 2023.
But wait, there is more to this story. India’s import of vegetable oils has also reached an incredible high. In just one year, there has been an impressive 33% increase in vegetable oil imports, totalling 18.66 lakh tonnes in August 2023 compared to the previous year, according to the Times of India.
So, what’s cooking in the edible oil segment?
Let’s find out.
India’s recent surge in edible oil imports is truly remarkable and is not a short-term trend. In fact, this record-breaking import is one of the highest in any marketing year, from November 2022 to October 2023.
During this period, India imported a whopping 141.21 lakh tonnes of vegetable oil, marking a significant 24% increase compared to the previous year’s 113.76 lakh tonnes.
To put it in perspective, the highest vegetable oil imports in a marketing year before this were recorded in 2016-2017, at 151 lakh tonnes, as reported by Moneycontrol.
What’s particularly noteworthy is the substantial contribution of palm oil imports to this achievement. According to the Economic Times, palm oil imports soared from 1.09 million tonnes in July to 1.12 million tonnes in August, hitting their highest level in nine months.
Why is India’s Edible Oil Imports at Record High?
1. El Nino Weather Threat and International Commodity Prices
Since November 2022, there has been a looming concern about the El Nino weather pattern and the unpredictable prices of international commodities. This concern has prompted Indian traders to increase their edible oil imports. They are doing this to ensure a stable supply of edible oil in case the weather causes challenges or the prices become uncertain.
2. Low Import Duties
India has set low import duties, at just 5.5%, for palm oil, soybean oil, and sunflower oil. This makes India an attractive destination for global suppliers of edible oil who want to offload their surplus oil supplies.
Because of these favourable import tariffs, there has been a significant buildup of edible oil stocks at Indian ports. Suppliers are taking advantage of this opportunity to serve the Indian market.
The chart depicts that vegetable oil inventories at India’s ports and pipelines have been the highest in 2023 since 2014.
3. Unfavourable Weather Conditions
This year, India faced an unusually dry August, the driest in over a century. This prolonged dry spell raised concerns about the health of local soybean and groundnut crops. To compensate for potential domestic crop shortfalls, Indian companies decided to increase their edible oil purchases from other countries.
4. Festival Season Demand
In India, festivals often mean more cooking activities and a higher demand for cooking oil. To meet this seasonal surge in demand, companies are proactively purchasing larger quantities of oil in advance. This contributes to the overall increase in edible oil imports.
Looking into the future, the Solvent Extractors’ Association of India (SEA) predicts that India’s vegetable oil imports might reach a record high. By the end of the current oil year in October 2023, they expect imports to range between 150 and 155 lakh tonnes.
This substantial increase in India’s imports could have significant global consequences. It might reduce the availability of palm oil in countries like Indonesia and Malaysia, possibly leading to higher prices. Additionally, the heightened demand could influence the price of soybean oil, affecting the countries that produce it. Similarly, nations involved in sunflower oil production may also experience the effects of India’s extensive purchasing.
Moreover, India’s significant stockpile of edible oils ensures a stable supply chain, particularly during the festival season. This stability could help in keeping prices reasonable for consumers.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The article is for information purposes only. This is not investment advice.