New Delhi, Delhi
Concerns are growing in the global edible oil market amid expectations of adverse weather conditions and rising domestic palm oil consumption in Indonesia. The Indonesian Palm Oil Association (GAPKI) has warned that severe El Niño conditions and drought could lead to a significant decline in the country’s crude palm oil (CPO) production. This could put upward pressure on edible oil prices in international markets as well as in India in the coming months.
According to GAPKI Chairman Eddy Martono, Indonesia’s total palm oil production is estimated at around 53 million tonnes. However, adverse weather conditions could reduce production by as much as 5 million tonnes. A decline in output could put additional pressure on the availability of palm oil in the global market.
Domestic Consumption Could Rise Due to B50 Policy
The Indonesian government is moving toward increasing the blending of palm oil-based biodiesel in an effort to reduce dependence on diesel imports. Following B40, the implementation of the B50 policy could further increase domestic palm oil consumption in the biodiesel sector.
According to GAPKI estimates, around 16.3–17 million tonnes of palm oil could be consumed domestically for biodiesel under the B50 programme. A combination of declining production and rising domestic demand could therefore affect Indonesia’s export volumes. This could reduce the availability of palm oil in international markets.
Why Could India Be Affected?
India meets a significant portion of its edible oil requirements through imports. The country imports large quantities of palm oil every year and relies heavily on Indonesia and Malaysia for supplies.
If Indonesian exports decline and production in Malaysia is also affected by weather-related factors, the cost of imported palm oil for India could increase. This could directly affect the prices of refined edible oils in the domestic market.
If palm oil prices rise significantly, demand could shift toward other edible oils such as soybean, sunflower and mustard oil. Increased demand for these alternatives could also put upward pressure on their prices.
India Currently Has Adequate Stocks
However, there is reportedly no immediate cause for concern in the domestic market. According to the government, India currently has around 1.4–1.5 million tonnes of edible oil stocks, which is considered sufficient to meet domestic demand for approximately one and a half months.
In addition, the arrival of the new soybean and groundnut crops is expected to begin from September. Increased domestic availability could help ease some pressure on imports and provide additional supplies to the market.
For now, the possibility of a significant rise in edible oil prices will depend largely on weather conditions, Indonesia’s export volumes and the actual implementation of its biodiesel policy. However, if global supplies tighten substantially, pressure on edible oil prices in India could increase in the coming months.
