Edible oil demands seen at 10-year low in upcoming Ramazan

KARACHI: The share of palm oil in Pakistan’s growing edible oil imports is expected to drop to the lowest since 2006 in the upcoming Ramazan as the early onset of summer accentuated the drop in buying despite seasonal increase in demand in the fasting month, a top importer said.

“Ghee and cooking oil packers have never seen such a sluggish demand over the last 10 years in the Muslim fasting month of Ramazan,” said the importer, asked not to be named.  “…this year due to extreme high temperature in summer the consumption of oil has declined.”

The trader said high temperatures in May, three- to five-degrees above normal, slowed consumption demand. Use of vegetable oil for cooking purposes usually wanes in summer.

Still the country’s vegetable oil imports typically peak in Ramazan when the Muslims break their fast at the dust during which consumption of fried and calorie-laden food rises.

Industry officials said the country’s import demand is likely to be weak in the summer months.

“In general, it was viewed that Pakistan is poorly covered for Ramazan demand,” the trader said. “However, looking at palm and liquid oil stocks the country has enough oil to cater Ramazan demand.”

He said the country has booked cargoes of around 290,000 tons of edible oils, mostly southeast Asian palm oil for April and May deliveries to meet Ramazan demand.

Pakistan is the world’s fourth largest consumer of vegetable oil, 90 percent of which is covered by imports, mostly of Malaysian RBD palm oil and olein. 

The country’s domestic demand is around 3.8 million tons. Pakistan also buys tiny amounts of soyoil from Latin America and sunflower oil from the Black Sea region.

Industry officials estimate edible oil imports to reach 2.6 million tons this season. There has been substantial increase in import of edible oils every year. It rose to 10.45 percent in 2015 from 5.74 percent in previous year.

Traders said the country has enough oilseeds stocks of imported canola and soybeans seeds, which the solvent extraction industry is crushing to sell liquid oil (cooking oil raw material) in the market. Oil extraction from imported oilseeds stands at 0.6 million tons.

Local traders forecast stable palm oil prices in the near-term on low productions in Malaysia and Indonesia this season amid El Nino – a weather pattern.

The palm oil settlement prices on the Bursa Malaysia Derivates Exchange rose to 2,579 ringgit/ton at the close trade on Thursday from 2,545 ringgit/ton in previous trade. 

“The hike in the international prices has touched its peak on April 20 (at $750/tons (cnf olein), thereafter, it has started declining,” one analyst said. “As projected that he El Nino impacts will diminish by start of May and the production in both Malaysia and Indonesia will start picking up, following this the prices in the international by end April came down to $700/ton. It has gone further down to $685 on May 25.”