Navigating the Volatile Landscape: Edible Oil Market in 2023

Disclaimer - The views expressed in this article by Vidya Bhushan are his personal views in his personal capacity and not as the company’s representative.

Unpacking the Volatility: Current Trends and Influencers in the Global Edible Oil Market

How do you evaluate the present price dynamics in the global edible oil market given your extensive experience in trading and risk management? Can you shed some light on the variables influencing these pricing shifts for oils like soybean, sunflower, and canola?

Indeed the edible oil market has been very volatile for last two years and expected to be volatile for times to come because of the various factors which is not only limited to supply and demand of edible oils but also various other macro factors. One good thing is we are over the high price environment and the prices are at relatively comfortable levels for all the stakeholders including Government of India. Going forward we need to really watch closely the following factors which will influence the prices

1. Sun oil push from Black Sea: This is the most important factor which is going to influence oil markets for next 3-4 months. In last 2-3 months we have seen that Blacksea/EU has been pushing Sun oil into India and whatever push origin gave in Sun oil, Indian markets were able to absorb that. So we need to closely watch how Sun oil prices react as they are harvesting their new crops.   
2. Bio-diesel demand: Bio-diesel demand is having a huge impact on edible oil prices in recent times particularly in soy because of increasing bio-demand in the US. Increasing energy prices might also trigger discretionary blending in Indonesia and EU which will impact edible oil prices.  
3. Weather development in US/SAM and El-Nino threat to Malaysia/Indonesia: We need to closely watch North and South American weather and crop development in US/SAM. El Nino in Malaysia/Indonesia is still a concern and in case of strong El-Nino dryness in Indonesia/Malaysia will have a huge impact on prices.
4. Political situation in Argentina: Argentina is currently under election mode and we need to closely watch the steps taken/promised by various leaders including the impact of Soy Dollar 4.0. We need to see how farmers in Argentina react to Soy Dollar 4.0 and how much push we can see under this program.
5. Indian demand: India has been the brightest spot on the food demand side this year, prices have come down to a level which is relatively comfortable for all the stakeholders and we have seen India importing back to back 1.7-1.8 MMT of oils in July and August. Various players in the market are estimating growth of edible oil consumption between 8-10%, which is massive, given how other destinations are struggling on the demand side. Given that India is entering into high demand period with festivities around the corner and if Indian demand continue to be this robust, this will definitely give support to edible oil prices.

Forecasting the Future: Market Development Amidst Challenges in 2023

How do you expect the market to develop over the course of the rest of the year, given the numerous difficulties and factors affecting the agri-trade ecosystem in 2023? What are the main trends or shifts in grains, protein foods, and oilseeds that industry stakeholders need to be aware of?

Based on the factors I have described above market is going to remain volatile for the rest of the year and players in Indian market have to choose their risk management tools wisely in order to manage this volatility. On the main trends we are seeing now which is applicable to all commodities are as under:

1. Geopolitical/Political based decisions: In the last two years we have seen how Ukraine-Russia war, Indonesian ban, changes by various countries on their bio-diesel mandate, export bans on various commodities show that uncertainties are not only a matter of concern for supply chain of the industry but they are also a matter of concern for various Govt and all the respective Govts are doing their best to ensure that there is no risk to food security and taking corrective measures accordingly. On one hand it is necessary, but on the other hand it also brings disruptions to the trade.
2. Changes in lifestyle: COVID is a bad thing which had happened to the world but it has also given a lot of lessons to people at large. In India we see that people are changing their lifestyle, people have become more aware and started giving importance to health and family. We can see in any park or gym in the morning and evening in India is full of fitness enthusiasts and with fitness the demand for protein and fibre rich diet is increasing which will give a boost to grain, poultry, milk and oil industries.
3. History is history: This is the most important thing which I had observed that future trends are no more reflective of past trends. Now we have to look at factors pre-Covid and post-Covid era and approach the market with a fresh mindset without having a baggage of past trends because last three years have taught us a lot of things which one has never seen in the past.

The Sustainability Factor: Its Impact on Price and Trade Dynamics

In terms of market insights, how do sustainability standards influence price stabilization and trade dynamics across various commodities?

Sustainability is something which has been most talked in the past few years and world realizes that we have our duty towards the environment and society. We have to give equal importance to sustainability standards like we give it to our profitability. Today I see how young kids are also trying to be responsible and also ask their parents to be responsible towards society and environment. Coming to our Agri-sector, globally we are seeing more and more companies setting their sustainability goals and targets to achieve their goals with certain timelines that show the commitment towards it and I can proudly say that the company I work for is also very committed towards it globally. As the concept of sustainability is relatively new, not every market is ready for it. Trade is used to follow a practice for long time and when it comes to changing something, it comes with a cost, so yes right now if you are committed to your sustainability goals and put your sustainability standards, it might come with a price but I would say its matter of time when consumers, producers and manufactures realize that being responsible towards environment and society is not optional and it’s the need of the hour, market and trade to adjust to it.

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