MCO in Bangladesh Threatens Ramadan Demand for Oils & Fats

COVID-19 came as a havoc on oils and fats market of Bangladesh. Since Ramadan, the peak consumtion vis-à-vis import period of oils and fats in the country, is ensuing, refiners, importers and traders were ready for a bumper business and were prepared themselves accordingly. Importers cum refiners had planned to import about 400,000 to 500,000 tonnes of palm oil and 100,000 tonnes of CDSBO during March to April period 0f 2020 to meet the peak demand of Ramadan.

Of the quantity, over 200,000 tonnes of palm oil, mainly RBD Olein and a small quantity of RBD PO, have been booked for arrival in March, 2020 and rest quantity supposed to be booked for import in May, 2020. Besides, another 80,000 tonnes of CDSBO also have been booked for arrival in March. During Ramadan, demand of palm oil goes high compared to any other months because of significant increase of consumtion of fried items. During fast breaking people prefers to consume fried items fried in palm oil as that gives crispiness, dryness and good taste to the prepared fried items. As a result, demand of palm oil reach to its peak during Ramadan. Besides, demand of Vanaspati and shortening also goes high, almost 100% of which produced using palm oil. Because of aforesaid reasons demand of palm oil demand and price of refined olein in the local market also hovers at high during pre-Ramadan and Ramadan period.  

But, because of COVID-19, all the plans of the importers cum refiners and traders have been shattered. Trading trend of loose oils, which occupies almost 70% of the total 3 million tonnes of oils and fats consumed annually in the country, was experiencing slow trading since the mid of March and came to zero since March 25, 2020 with the imposition of Movement Control Order (MCO). It may be mentioned here that palm oil is leader is loose oil trading, while soyabean oil is leader in branded oil trading. In loose oil trading volume, about 80% is occupied by refined/super olein and rest 20% by refined soyabean oil. In branded oil trade almost 95% is refined soyabean oil, 3% is refined olein and rest 2% is rapeseed/canola oil. An insignificant quantity of rice bran oil, sunflower seed oil is also traded in branded market. Sunflower seed oil is 100% imported, while rice barn oil is locally produced. Branded oils are delivered directly to the retailers by brand producers themselves. There are two categories of brand oil producers, one is refiners themselves and other one is packers, who used to buy oils from refinery owners in bulk and market the same in their own brand by bottling under their own arrangement. 

There are two wholesale trading centre in the country, one is Dhaka and other one is in Chittagong. Wholesale centre in Dhaka controls about 60% of the total loose oils traded in the country, while Chittagong centre controls the rest 40%. In loose trading, refined olein and refined soyabean are marketed in 180 kgs drum, while rapeseed/canola is marketed in 16 kgs. Tin pack. Wholesalers of aforesaid two markets used to buy Delivery orders (DO), each of 6 tonnes, from the refinery owners for onward sale to traders across the country. 

If the situation does not improve and MCO continues, as opined by the concern circle, importers cum refiners will be in big problem as they have opened the LCs by borrowing money from banks and also from the wholesalers thru advance trading of DOs.  In case trading does not comes to normal at the earliest they may face huge financial loss in the form of bank interest against the loan amount they have taken from bank. Simultaneously, wholesalers would also be in problem if they fail to lift the cargo from the refinery as per schedule of the DOs.

As a result of the aforesaid situation, everybody in in panic and awaiting eagerly for improvement of the prevailing situation.            

Prepared by Fakhrul Alam

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