Price Dynamics in the Edible Oil Market

The edible oil market has experienced significant price fluctuations in 2023 and it looks like vegetable oil prices are expected to consolidate and probably stabilise. What is your sense of these price dynamics given your extensive Indian and Global experiences, your leadership position at Emami Agrotech Ltd and at various Industry bodies. Moreover, based on the current market landscape, where do you project the price trajectories for major edible oils heading into the next year?

In 2020, the world witnessed a seismic shift in global dynamics, leading to a state which  I term as  'Extremistan' characterized by unprecedented volatility. This transformation was the result of a complex interplay of fundamental forces, policy decisions, and political shifts. It's crucial to understand that  fundamentals especially that influence the Farmers and Consumers, the Global  macro  headwinds continue to  have a profound impact on policy choices, shaping actions such as India's duty reductions, regulatory shifts, Indonesia's bans driven by inflation, and the rise of Bio Fuel Mandates and the response of the producers and consumers to the Ukraine crisis and more importantly emergence of new supply origins for veg oils. Consequently, we have witnessed extremely dramatic movements in physical price, in global exchanges, in the domestic mustard and soya bean prices and in the Policy measures making it a complex environment for supply chain, hedging tools  and more importantly putting to test the resilience of the companies to re-align with the new market regime. 

As we enter the current year, there's cause for optimism as the food service sector, poultry, and aquaculture rebounded from the challenges of high prices and disrupted supply chains in 2022. India's oilseed crop outputs and imports reflect a remarkable resurgence in demand, up by 6-7 percent to approximately 26 million tons, up from 24.5 million tons in the 22/23 Oil Year.

The ability to effectively manage price risk will be the linchpin of success in this ever-evolving landscape. While opportunities beckon, we must also prepare for potential challenges arising from unpredictable macroeconomic factors, such as currency fluctuations and international trade policy shocks. 

In the year ahead, our focus should revolve around the impact of El Niño on Asian production and developments in South American soya plantings and of course the Grain Corridor at Black Sea. Despite the challenges, we remain cautiously optimistic about sun oil abundance which is enabling the same to compete with soya and even palm oil for global market share. We can also expect an overall improvement in edible oil availability along with demand growth with the bounce back in soya crops. There is going to be ample supply from global markets in the coming six months. 

Apart from price forecasts,  I think what’s important is to assume and manage the price  risk more efficiently and profitably with much more speed, efficiency and discipline than ever before with a definitive approach to changed dynamics of Risk and Reward equation while making business decisions. 

Navigating Challenges in Palm Oil and Supplies

With challenges such as the B35 mandate impacting palm oil consumption and the overall tightening of supplies, how is Emami Agrotech Limited positioning itself to navigate these challenges? Can you also shed light on any strategic initiatives imperative for all stakeholders in India and the key drivers of the markets?

In today's world, the future is unmistakably shaped by the convergence of "Food & Fuel," rendering any lingering debate about Food versus Fuel irrelevant. With the global demand for Biofuels on the rise, especially in regions like the USA, EU, and Indonesia, where nations align their strategies with ESG commitments, a new era of competition is dawning within the food sector. Indonesia’s resolve to implement and improve B35 blending mandates and there by policy uncertainties are crucial factors for palm price and production evolution. 

Thailand, Papua New Guinea, and India's steadfast efforts in oil palm cultivation, poised to transcend mere tactical manoeuvre and become strategic supply bastions. This transformation gains paramount importance given the stagnation in Malaysian Palm production and marginal increases in Indonesia with potential export restriction, whether through duties or quotas. Similarly, in the world of soybean oil, disruptions in Argentina's crop and a drop in canola crop in Canada have opened the doors to alternative supply sources like Russia, Turkey, Thailand, Iraq and Vietnam etc.,  thanks to the fantastic crop of Brazil coupled with exportable surplus of oilseeds even making up for the potential shortfall from US soya crop. 

As the world's largest importer of oils, India plays a pivotal role in these global shifts, both influencing and being influenced by these factors being import dependent to the extent of about 65 percent of consumption.

India's resilience and vulnerability were put to the test during export bans imposed by Indonesia and the Ukraine conflict. While edible oils always find their way to India, the present juncture offers a golden opportunity for the nation to institute urgent self-sufficiency measures. 

The Indian Vegetable Oil Producers' Association (IVPA) has proposed a robust framework, encapsulated in a "Dynamic Duty Slab" system where in duties can get auto triggered creating an equilibrium price table in India fostering stable policy. Furthermore, IVPA has  submitted compelling recommendations for  National Mission on Oilseeds towards self-sufficiency which are under discussions. 

Currently, we have  abundant rapeseeds and soya beans but not able to achieve the requisite crushing pace, paving way for huge imports and it should be a cause of concern. India has imported much more oil than required with an over anticipation of festival demand in the last 2 months. Low differential duty of crude  and refined palm has also led to excessive overall palm imports of both crude and refined oils. All such  issues require careful analysis for speedy correction which is where the IVPA’s  proposal of “dynamic duty slab system “would help maintain a right balance between imports and domestic crops and also between farmers and consumer prices and there by the overall volumes. Currently the NAFED stocks release of mustard seeds into the market and its impact on prices and imports,  will also be key factor. At present it appears, every major oil is competing for market share in the Indian consumption basket.

Within this 26-million-tonnes market, consumer choices and regulatory frameworks for product offerings are critical drivers of innovation. At Emami Agrotech, we continue to introduce new brand variants. However the strict implementation of regulations governing loose oil sale, which is otherwise banned by law, has the potential to revolutionize the landscape of pure and safe product offerings in Packaged form and in brands encouraging more Research and Development. This  move can spur the growth of safe, nutritious, and health-conscious branded oils.

The Influence of Trade Bodies on Market Stability

You've been actively involved in various industry trade bodies such as IVPA. How do such organizations influence the broader edible oil market, especially in terms of price stabilization and setting industry standards? Given the shifts in 2023, are there any collaborative efforts or initiatives these bodies are considering to ensure market stability and growth?

During my four-year tenure as President of IVPA, we have solidified our position as the industry's trusted body acknowledged as the credible voice, providing the government with accurate data and representations. We have also cultivated valuable partnerships through Memorandums of Understanding (MOUs) with prestigious organizations like MPOC, MPOCC, MPOB, RSPO, and PORAT (Palm Oil Refineries of Thailand), with more collaborations on the horizon. These alliances create platforms for growth, both nationally and internationally. Working with associations, I think, it is imperative to work seamlessly with the Government with data, analysis and comprehensive recommendations for a right approach to the sector whether it is duties, or meal imports/exports, or impetus to growth of domestic oilseeds crops, or most importantly the right price to the consumers. Indian sector is so uniquely  poised with so many dimensions both in the production and the consumption side of huge spectrum of oils  and marginal changes in either would mean a great impact on supply or demand due to the sheer size of the markets. This nuanced approach enables seamless integration for the collective benefit of our industry i.e. one of the sectors of paramount national importance.

Let us remember that veg oil sector of India is very resilient. Together, we will navigate the challenges ahead and forge a brighter, more sustainable future for our industry. My special thanks to Tefla’s and Globoil for continued support to IVPA. Globoil’s relentless evolution makes it a grand event attracting all the stakeholders from all over the world. 

Let’s embrace the future with optimism, deep learnings, renewed vigour and confidence and collaboration. 

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