Edible oil is a significant commodity in the global market. Over the past two to three years, it has experienced substantial price volatility. In May 2020, during the peak of global Covid lockdowns, the global vegetable oils price index of the UN Food and Agriculture Organization dropped to 77.8 points. However, it reached an all-time high of 251.8 points in March 2022 following Russia’s invasion of Ukraine.
Factors Contributing to Price Volatility
The recent conflict between Ukraine and Russia significantly disrupted the world’s supply of this oilseed. Both Ukraine and Russia accounted for nearly 58% of global production in 2021-22, causing prices to skyrocket when the Black Sea ports were shut off due to war. The situation changed with the Black Sea Grain Initiative agreement brokered by the UN and Turkey between Russia and Ukraine. This facilitated the safe navigation of vessels carrying grain and foodstuffs from designated Ukrainian ports, resulting in international vegetable oil prices falling below pre-war levels.
Impact on India
This ongoing global event has significant implications for India. Reduction in the price of imported sunflower oil could notably reduce the cost of edible oils in India. With the landed cost of sunflower oil being approximately USD 950 per tonne, increased imports could lower the overall price of edible oils in the country.
When prices soared, many households and institutional consumers switched from sunflower oil to cheaper alternatives. However, now that import flows and prices are normalizing, consumers are returning to sunflower oil.
Moving Towards Market Expansion
Traditionally, sunflowers have been grown in Karnataka, Telangana, and Maharashtra, creating a substantial market for sunflower oil products. But the decline in domestic sunflower oil production over the past decade has opened up opportunities for increased imports to meet the rising demand. Both importers and sellers can play a crucial role in meeting this demand for branded sunflower oil.
Understanding India’s Cooking Oil Consumption
India consumes between 23.5-24 million tonnes of cooking oil annually, over half of which is imported. Sunflower oil is among the top four most consumed oils, trailing mustard, soybean, and palm oils. While most sunflower and palm oil are imported, mustard and soybean oils have a higher domestic output share.
India’s Initiatives in the Cooking Oil Sector
To address these challenges, the Indian government launched the National Mission on Edible Oils-Oil Palm as a centrally sponsored scheme. This scheme focuses especially on the northeast region and the Andaman and Nicobar Islands, aiming to increase palm oil cultivation over more hectares by 2025-26. Another step to improve data management in the vegetable oil sector is the web-based platform developed by the Directorate of Sugar & Vegetable Oils for online submissions and registrations from vegetable oil producers.
Despite price volatility due to global events, edible oil remains a critical commodity in India’s economy and households. The efforts to increase domestic production and improve data management in this sector will likely prove beneficial in mitigating market instability and meeting the rising demand.
Last Modified: February 20, 2024