Amid falling global prices, edible oil players see demand uptick

As they respond to falling international prices, Indian edible oil players see lesser impact from the drop amid resurgence in household and industry demand after a tough June quarter (Q1).

Domestic edible oil prices for commodities like packed palm oil, soybean, sunflower, groundnut, and mustard, among others react to international price trends of crude palm oil (CPO), RBD (refined, bleached & deodorised) palm oil, crude degummed soybean oil, and crude sunflower oil. As a result, both international and domestic prices had peaked and remained high since March before beginning to soften in May-June.

Inflationary trends led by edible oil prices had hurt both household and industrial demand for soft and hard oils in Q1. But now the edible oil industry is optimistic that falling international prices, resulting in lower domestic prices, coupled with the upcoming festivals, will push demand.

According to industry sources, international prices have fallen from roughly $2,000 per tonne in March 2022 to nearly $1,200 per tonne for CPO while that for RBD palmolein fell from over $1,900 per tonne in March 2022 to nearly $1,200 per tonne. In response, in just last one month, prices in the domestic market have fallen from Rs 160 per kg in June to Rs 145 per kg now for packed palm oil, Rs 170 per kg to Rs 160 per kg for soybean, Rs 190 per kg to Rs 182 per kg for sunflower, and Rs 180 per kg to Rs 175 per kg for groundnut.

Angshu Mallick, managing director and chief executive officer, Adani Wilmar, said with international prices softening, the edible oil major will also follow suit soon.

“It is natural and cyclical for the domestic market to respond to international price trends and we will follow suit, though the quantum cannot be ascertained right now. Our prices are based on the average of previous couple of months of price trends and do not reflect immediate highs or lows,” Mallick told Business Standard.

Priyam Patel, chief executive officer of N K Proteins, said: “In April-June, business was low due to high prices and budgets being cut due to inflationary trends across sectors. But there has been a steep correction in the past 15-30 days, internationally and proportionate fall in domestic prices, which, though it affects our books due to lower prices, will help boost demand in the medium term.”

However, according to Patel, the impact on domestic prices is not usually commensurate. “If palm oil prices reduce by Rs 25-30 per litre, then cottonseed oil will reduce by Rs 10 per litre and groundnut oil by Rs 5 a litre. With reduced prices and festivals from August to October, we should see resurgence in demand for both soft and hard edible oils,” Patel added.

Hard oils like palm, which are semi-solid at room temperature, are used for making hydrogenated fats like vanaspati and margarine or as key ingredients in making bread, biscuits, cookies, cakes, noodles, frozen dessert, soaps, and cosmetics. On the other hand, soft oils like soybean, sunflower, mustard, and groundnut, which are in liquid form at room temperature, are used directly for cooking or frying within households.

While quarterly results for most of the listed edible oil players are still awaited, industry observers believe Q1 may see an impact due to high inflation.

“A general feeling from the industry is that due to high international and domestic prices in April-May alone, demand and sales had taken a hit of nearly 50 per cent. It was only in June when prices began to fall. Not just the households but also the horeca (hotels, restaurants and catering) segment had seen an impact on demand which is likely to affect the results,” said B V Mehta, executive director of the Solvent Extractors' Association of India (SEA).

Meanwhile, according to Mehta, the percolation of fresh fall in international prices will take some time. “For the local prices to mimic the fall in international prices, it takes 15-20 days in case of palm oil which has a shorter order to supply gap while that for soybean takes 45 days. Hence, one can expect domestic prices to reflect further after these periods,” said Mehta.

		Change %
( As on Jul 11 12.45)	CMP ( Rs)	1-M	3-M	YTD
Adani Wilmar	596.2	-4.3	3.3	-
Patanjali Foods	1,051.9	-3.3	14.6	23.5
Gujarat Ambuja Exports	309.0	1.1	5.4	82.2
Agro Tech Foods	855.2	6.3	-4.4	-13.6
AVT Natural Products	95.1	2.5	-23.8	23.0
Gokul Agro Resources	95.3	-10.5	12.2	40.5
Manorama Industries	994.0	-12.7	-22.7	-27.5
BCL Industries	377.0	-2.0	-22.0	18.6
Vegetable Products	42.0	-18.1	-39.5	71.5
Vijay Solvex	1,315.0	-32.8	-32.0	-39.5
Ajanta Soya	51.8	2.1	18.7	12.4