Vegetable oil prices shooting high

The story: India is the world's top importer of vegetable oil, and will spend billions of extra dollars in 2021 to buy more costly cooking oil from ov

 Vegetable oil prices shooting high 

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• The story: India is the world's top importer of vegetable oil, and will spend billions of extra dollars in 2021 to buy more costly cooking oil from overseas. The government is thinking of cutting taxes on those imports to soften the pressure to the economy.

• Details: Problems in the global production of key oilseeds coupled with rising biodiesel use have fuelled the global 'vegoil' rally.

1. Soyoil futures have jumped more than 70% this year after drought tightened U.S. and Brazilian soybean supplies. The U.S. Department of Agriculture has forecast global soybean stocks will fall to a five-year low of 87.9 million tonnes by September.
2. Palm oil prices, the most widely consumed edible oil, also rallied 18% in 2020 after COVID-19 lockdowns curbed output from plantations in Southeast Asia.
3. Benchmark futures in Malaysia touched 4,142 ringgit ($1,007.30) a tonne in mid-March, their highest since 2008.
4. Poor rapeseed and sunflower seed harvests in Europe and the Black Sea region further tightened edible oil supplies, helping push global food prices to 10-year highs last month.
5. Mirroring record global prices, domestic palm oil and soyoil rates have more than doubled in 2020.

• India's imports are huge: As the top edible oil importer, India spends an average of $8.5-$10 billion annually on imported vegoils and the recent price surge will only inflate its bloated import bill further. Vegetable oil is India's third-biggest import item after crude oil and gold.

1. India's vegetable oil imports have surged to 15 million tonnes from 4 million only two decades ago
2. It could touch 20 million by 2030, boosted by a growing populace with higher incomes and a taste for calorie-laden curry and fried food
3. Domestic oilseed production has failed to keep pace with demand, as farmers prefer to grow grains like rice and wheat, the price of which is guaranteed by the government.
4. India produced about 10.65 million tonnes of edible oils in 2019-20, less than half of the roughly 24 million tonnes it consumed during that period. It imported the rest, buying around 7.2 million tonnes of palm oil from Indonesia and Malaysia, about 3.4 million tonnes of soyoil from Brazil and Argentina, and 2.5 million tonnes of sunflower oil, mainly from Russia and Ukraine.

• Official action: Rising vegetable oil prices have further hit people already reeling from record fuel prices and lower incomes due to a devastating second wave of COVID-19 infections. The government has voiced support for greater domestic production of oil crops in recent years, and had been expected to unveil incentives for farmers willing to expand oilseed output in its latest annual budget plan. But a viable plan to raise oilseeds production is missing.
• Summary: India grows several oilseeds - mainly peanuts, soybeans and rapeseed (mustard) - but their prices are not guaranteed by the government like grain prices are. As a result, Indian output of rice and wheat is nearly six times greater than total oilseed output on average. Govt. earns Rs.35000 crore ($4.79 billion) from levies on edible oil imports, and must set aside some of that to incentivise farmers to switch to oilseeds.

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