Soyoil prices may rise amid supply crisis

Edible oil prices were on the boil last year amid supply disruptions due to the Russian invasion of Ukraine, a major exporter of sunflower oil. India, which meets a large chunk of its edible oil requirements through imports, was hit due to the surging price. Over time, prices cooled as supply improved.

Now, a huge drought in Argentina threatens to disrupt the edible oil market once again.

Farmers in Argentina, the top soyoil and soymeal exporter, are running crop losses due to prolonged heat waves and deficient rainfall.

In the week ended Friday, prices of soyoil rose 4.16% to 55.90 cents per pound on the Chicago Board of Trade (CBOT), while the oil traded at ₹1,040 per 10 kg, up ₹15 on week, according to people familiar with the development.

“Soyoil prices are expected to increase further by ₹10-15 per 10 kg in the spot market and touch 56.6 cents per pound on CBOT until crushing of mustard seed gathers pace from mid-April,” said Indrajit Paul, assistant general manager of agri-output at DeHaat, an agritech company.

India’s soyoil imports from Argentina, which has a share of about 37% in India’s total soyoil imports, is seen dropping 1 million tonne (mt) on year to 1.5 mt in 2022-23 (October-September). With this, the country’s total soyoil import will likely be about 2.7-3.0 mt against 4.2 mt last season, Paul said.

Though the soyoil market in India is seen as tight and prices to be range-bound in anticipation of a drop in the oil import from Argentina, mustard oil is expected to compensate amid its record production this year.

In 2022-23 (July-June), output of mustard seed is estimated to be 12.8 mt compared to 11.9 mt last year, according to the government’s second advance estimate. The industry, however, anticipates a fall in production at 11.2-11.5 mt due to inclement weather conditions. The concern over supply tightness is not long-term as the new soybean season, which is six months away, will ease the pressure on the supply chain, said Hemant Bansal, vice president at Indian Vegetable Oil Producers’ Association and former vice president at Pantanjali Foods Ltd.

The shortfall in soyoil availability is also likely to be compensated by an overflow of sunflower oil at a cheaper price. “After the 60-day extension on the Ukraine Black Sea export corridor deal, crushers are trying to increase pumping of sunflower oil and export it to India, and the oil is currently $70-90 per tonne cheaper than soyoil available in India,” Bansal added.

The US Department of Agriculture (USDA) has cut global soyoil production estimate to 60.21 mt due to a considerable fall in Argentina’s production. This indicates lower export by Argentina, which is projected to export about 4.75 mt of soyoil in the 2022-23 (October-September) season. Argentina’s crop outlook will be clear once it starts harvesting from late May.