Edible Oil Prices Expected to Remain Elevated Amid Global Supply Tightness

Edible oil prices are expected to stay elevated for several months ahead. Geopolitical tensions and El Nino threats are tightening global supplies significantly. Indonesia's biodiesel push further reduces palm oil available for export markets. India's festive season demand will also contribute to strengthening edible oil prices. Domestic oil palm cultivation expansion aims to reduce import dependence.

New Delhi: Edible oil prices are likely to remain elevated over the next few months ahead of festive season as geopolitical tensions, the threat of El Nino and Indonesia's biodiesel push tighten global supplies, according to Sunil Kataria, CEO & MD, Godrej Agrovet, one of the largest producers of crude palm oil in India.

"Prices have remained elevated for the last eight to ten months and are likely to stay in a similar range over the coming months," Kataria told ET, adding that a severe El Nino could hurt oil palm output in Indonesia and Malaysia - the world's two largest producers - and the impact is more likely to be felt in the next crop cycle.

The company is betting big on that opportunity and plans to expand its oil palm plantation area from about 80,000 hectares to 1.4 lakh hectares over the next four to five years. It inaugurated a ₹300 crore integrated oil palm complex in Telangana on Monday, housing a processing mill, refinery, seed garden, research centre and farmer advisory facilities to build an end-to-end palm oil value chain.

The mill at the complex, the first set up by a private company in the state, has begun operations with a capacity of 30 tonnes per hour and is designed for expansion to 60 tonnes per hour.

Kataria said the government's National Mission on Edible Oils-Oil Palm (NMEO-OP) remains India's best bet to reduce import dependence as a successful public-private partnership that is helping expand domestic oil palm cultivation.

Until now global factors and not domestic production have continued to dictate prices of edible oil as India imports nearly 60% of its edible oil requirement, spending an estimated $15-19 billion every year on edible oil imports, with palm oil accounting for nearly half of the total.

The company, which owns dairy brand Jersey, processed poultry brand Real Good Chicken through its joint venture with Tyson Foods, and crop protection business Astec LifeSciences, also has a sizeable presence in animal nutrition and branded cattle, poultry and aquaculture feed.

The oil palm business contributes around 20% of Godrej Agrovet's revenue but nearly 40% of its profit before tax, reflecting the segment's strong margins, Kataria said. He added that higher crude oil prices could also divert more palm oil towards biodiesel production in Indonesia, leaving less for exports. With India's festive season beginning from August, demand for edible oils is also expected to strengthen, providing further support to prices.