Palm Oil, Looking Beyond The Pandemic

Before the country started limping back from the effects of the pandemic, another major event seemed to throw a spanner in the works. China made some incursions into Indian territory, resulting in a military confrontation and casualties on both sides. India was now faced with two major challenges, one to its sovereignty from a neighbour and the other to its people and economy from the pandemic. Even before this, Indian PM Narendra Modi had given a clarion call for “Aatma Nirbhar Bharat” (“Self Reliant India”). This slogan was reinforced in the light rise in patriotic fervour as a result of the border issue with China.

India is a major importer of vegetable oils for edible usage, making cosmetics, oleochemicals and medicines. More than 65% of the domestic needs are catered to by imports. To balance the gap between demand and supply, the country needs to ramp up domestic production significantly.  There is firm conviction within the industry that where there is a will, there is a way. A national oilseeds mission is the order of the day. As mentioned by a speaker in a recent webinar, this was ably demonstrated in the 1987-92 period. The then technology mission on oilseeds, under the stewardship of Sam Pitroda, resulted in an increase in domestic oilseeds production from 12 MMT to 22 MMT. If it could be done then, why not again now?

Whilst acreage under cultivation is on the increase, the crying need of the hour is to increase agri yields. Mustard, sunflower, groundnut and cottonseed possesses potential to increase oil output but only marginally. The maximum potential lies in oil palm. This is the only crop that can give 4 MT of oil from every hectare, under ideal conditions. India has identified about 2 million hectares suitable for oil palm cultivation. This can, in due course, yield upto 8 MMT of palm oil. For this to materialise, the country needs to have a long-term vision and strategy. If the GOI wants “aatma nirbhar bharat” in oilseeds, oil palm is the crop that will help it go a long way.

Rain Gods have been kind thus far this year. The monsoon commenced on time and, in the first five weeks of the season, rainfall has been regular. Forecast by the Indian Metrological Department has pegged the rainfall this year to be well spread out and normal. That is one of the bright spots in an otherwise sea of negative news. Major oil seeds will be sown this season. Sowing is expected to end by July end. The progress of major oil seed states like Maharashtra, Gujarat and Madhya Pradesh holds the key to the final production. With the expected increase in acreage, a good harvest is on the anvil.

The stocks of vegetable oils in the country are also at historic lows. In view of the pandemic,  off-take continues to be subdued, though signs of recovery are obvious with the relaxing of the restrictions. June-end stocks are 25% lower than the same period last year but 4% higher than the previous month. The manufacturing pipeline, which was dry, has absorbed the entire imports of June 2020. Imports in the next two months will have to be robust to ensure the pipeline is replenished to a reasonable extent but thereafter a slowdown is again expected. PPO stocks and soft oil stocks have both shown a marginal rise over the previous month. In soft oils, CDSBO stocks are almost unchanged, CSFO stocks has increased by 6%.

Vegetable oils imports in June 2020 were sharply higher than previous month, registering an increase of 64% to 1.16 MMT. CPO imports registered a 51% increase but soft oils showed a jump of 87%. This signifies a lack of demand from the HORECA segment with the focus still being on home consumption. While retail consumption is on the rise and is expected to rise further in the coming festival season, the HORECA sector holds the key for palm oil demand. The HORECA sector is slowly being revived with relaxation of lockdown rules.

The question on everybody’s mind is: is the worst over? It is hoped that the pandemic curve has flattened out and better times lie ahead. The industry is limping back. It is hoped that the gradual opening up of the economy and the upcoming festivals season will bring in good tidings for the industry as a whole and palm oil in particular. 

Prepared by Bhavna Shah

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