“There is panic in the traders’ fraternity and distributors are buying as much as they can procure, fearing a shortage. Some companies are also abruptly canceling orders without any intimation since prices are very steep right now,” said Dhairyashil Patil, president of the All India Distributors Federation.
Fears over the supply shortage and a 10-15% increase in prices have led to disruptions in trade cycles for palm and crude oil, executives said.
“There is a need to increase the stock control limit imposed on distributors, wholesalers and retailers of cooking oils to ensure smooth supplies,” said Sudhakar Desai, president of the Indian Vegetable Oil Producers’ Association.
The Indonesian ban comes at a time when raw material inflation across multiple commodities such as wheat, sugar and coffee is already at all-time highs. Prices of edible oils and confectionery, biscuits, noodles, soaps and shampoos have gone up, since palm and crude oil are key ingredients of these products, analysts said.
Akshay Modi, managing director at Modi Naturals, which sells premium edible oils such as Oleev, said: “We are waiting and watching as the news about Indonesian ban is changing every day. First they announced a ban on all palm oil, then they excluded crude, which was a relief, and now they have again included it.”
Modi said since India imports 65% of the edible oil it consumes, and as sunflower oil is anyway not coming due to the war in Ukraine, the situation has become very delicate due to Indonesia’s decision.
Brokerage firm Jefferies said in a report that the ban is a core cause of concern for packaged goods companies such as Hindustan Unilever, Godrej Consumer Products, Britannia and Nestle.
Although distributors, wholesalers and retailers are buying more cooking oil, some executives representing the edible oil sector said they don’t expect Indonesia’s export ban to last beyond a few weeks.
“We think that the current shortage of cooking oil will last for two-three weeks. Companies are buying to just maintain the supply chain, waiting for the Indonesian export ban to get lifted as prevailing prices are very high,” said Sandeep Bajoria, president of the International Sunflower Oil Association.
Desai of the Indian Vegetable Oil Producers’ Association said: “As the palm fruit is highly perishable and Indonesia does not have enough storage, they will have to resume exports after Ramadan.”
Desai thinks that companies are resisting buying excess stocks at this time as prices of the cooking oils in the forward markets could be cheaper.
Cooking oil prices have surged by Rs 5-6 per kg in the past three-four days. Prices may increase further in May due to a fall in imports. “High prices may lead to a fall of about 2-3% in domestic consumption,” he added.
India could face a shortage of 300,000 tonnes of cooking oil in May, executives said, adding that the only way to deal with the situation would be to curb consumption. “Consumers will have to consume less as the prices will remain high for a few more days after Ramadan. The situation is out of anybody’s control,” said Bajoria.
Reuters, in a report on Thursday citing four industry officials, said Indonesia, which expanded its palm oil export ban late last week, has trapped at least 290,000 tonnes of the edible oil meant for India at ports and oil mills.