Ukraine crisis might push edible oil rates up; wheat exports could gain

Reports said Lebanon, which imports 60% wheat from Ukraine has started talks with India after the crisis

Brace for some serious spike in the already high domestic edible oil prices if the current crisis in Russia and Ukraine continues for long as both the countries together account for almost 90 per cent of the annual 2.5 million tonnes of sunflower oil imported into India.

Sunflower oil is the third largest edible oil imported into the country after palm and soybean oil.

India imports almost 60 per cent of its domestic edible demand of around 23 million tonnes every year as local oilseeds production is insufficient to feed its growing population.

Trade sources said a prolonged unrest and disruption of port facilities could put pressure on the already tight supply situation in alternative palm and soybean oils further pushing up their prices.

On an average in a month India imports around 200,000-225,000 tonnes of sunflower oil of which almost 70 percent comes from Ukraine and 20 per cent from Russia while the balance 10 per cent is supplied from Argentina.

Crude sunflower oil prices have already risen by almost 16.4 per cent in the last one year while the price rise in palm and soybean oils has been even steeper.

Trade sources said palm oil supplies are already looking shaky because of curbs in Indonesia, shortage of labour in major growing countries and diversion towards fuels which has rallied the markets since the last almost a year, now the current crisis could further bother the markets.

Data shows that the landed price of crude palm oil on February25 was almost 63 per cent more than the same period last year while that crude soybean oil was almost 54 per cent more than last year.

“There is a likely chance of non-availability of sunflower oil if the situation continues by the end of March. However, this is a future worry if the situation doesn't ease out, but we are hopeful that the situation will ease out over the next few days. Ports have already shut in Ukraine and there is no movement of vessels as well,” Chandra Shekhar Reddy, VP Sales and Marketing at Gemini Edibles and Fats India told Business Standard.

Angshu Mallick, MD and CEO at Adani Wilmar Ltd, one of the country’s premier edible oil brands said that currently, India has sufficient sunflower oil which will last till mid-April, if the situation persists, then consumers will opt for other oils like rice bran oil and soybean oil due to non-availability of sunflower oil.

“However, I expect the situation to ease out over the next 7-10 days,” Mallick hoped.

B V Mehta, Director General of Solvent Extractors Association of India (SEA) was also hopeful.

Mehta said that there has been some correction in prices since yesterday in edible oils and hopefully the situation might ease in the coming weeks.

“Or else the Centre will have to respond with another round of reduction in whatever little duty is still imposed,” a trader with a leading global commodity trading firm said.

For wheat and cereal exports from India, the current crisis comes as a blessing in disguise.

The spike in wheat prices due to the absence of Ukraine from the world markets might push buyers towards India which is readying to harvest a record crop in the next few weeks.

Already, reports show, Lebanon, which imports 60 per cent of its wheat from Ukraine has started talks with India for import of wheat.

Trade sources said already in some markets of India the price of Indian wheat has started quoting above the Minimum Support Price (MSP) of Rs 2015 per quintal for specific qualities which should gladden the hearts of farmers.

India exported wheat worth $1.43 billion between April to December 2021, which was a staggering 430 per cent more than the same period last year.

“Next wheat crop from Ukraine will come around June, while till that time India can feed the world. Average global wheat prices are around $320 per tonne (FOB) while Indian prices are also around the same levels which makes us very competitive,” the trader said. He said the same situation is also in corn.