Edible oil volatility: Refineries demand fresh price hike before Ramadan

Edible oil volatility: Refineries demand fresh price hike before Ramadan

File photo

The edible-oil market is facing a fresh supply risk ahead of next Ramadan as local refiners have sought another  price increase. They have warned that mounting losses from higher international  prices could discourage imports and disrupt the supply of essential cooking oil.

The demand for a price hike comes barely 20 days after the latest rise, raising fresh concerns that continued pressure on refiners' margins could eventually trigger a supply crunch during the peak demand period of Ramadan, a commerce ministry official said.

The Bangladesh Vegetable Oil Refiners and Vanaspati Manufacturers Association submitted a proposal to the government on September 20, seeking an adjustment of edible oil prices, citing higher international prices and the need to ensure uninterrupted supplies across the country.

The letter said the international price of soybean oil has risen to around $1,325 per tonne from $1,200, while the price was around $1,270 per tonne when the previous domestic price adjustment was made on September 2. The refiners claimed that at the current international prices, they are incurring a loss of around Tk 17 per litre for soybean oil.

Despite the losses, they mentioned they have continued supplying the essential product and opening letters of credit (LCs) for imports based on the government's assurance that domestic prices would be adjusted in line with international market conditions. The refiners fear that continued losses could eventually discourage imports, potentially putting pressure on the domestic supply of essential cooking oil.

The association also warned of a possible supply shortage in the coming months, particularly ahead of the next Ramadan, when the demand for edible oil traditionally rises significantly. However, Commerce Minister Khandakar Abdul Muktadir has indicated that the prices will not be increased before scrutiny of the refiners' proposal.

Replying to a question at a programme in Sylhet recently, he said the government would examine the matter before making any decision on another price adjustment. The refiners, meanwhile, have urged the government to make a decision quickly, arguing that keeping domestic prices unchanged despite rising import costs could create additional pressure on the supply chain.

Industry insiders said any fresh adjustment would likely depend on international soybean oil prices, import costs, exchange rate movements, and other related expenses. In the letter, the refiners' association also referred to an assurance given by the government on September 3 to consider an adjustment of cooking oil prices as early as possible. The edible oil market has experienced supply disruptions several times this year.

In February, the market witnessed a supply crisis, following which the price of bottled soybean oil was increased by Tk 4.0 per litre to Tk 199. The market again faced a supply crunch in July.

Subsequently, the government and refiners agreed to raise the prices of soybean oil by Tk 5.0 per litre on September 2. Under the latest pricing structure, the price of bottled soybean oil was increased to Tk 204 per litre, while that of loose soybean oil rose to Tk 185 per litre.

The price of a five-litre bottle was also raised to Tk 1,000 from Tk 975. The latest demand for another price hike has raised fresh concerns over the stability of the edible oil market, particularly if international prices continue to remain elevated and importers become increasingly reluctant to bring the product into the country.

According to the commerce ministry, the country imports 2.2-2.6 million tonnes of crude soybean and palm oils annually against the domestic demand for more than 2.2 million tonnes of edible oil, above 90 per cent of which is met through imports.

You can learn about South Asia's largest exhibition on this topic through this link: https://oilsfatsasia.com/

Source: Online/OFA