Sunflower oil and wheat prices are witnessing an upward trend in India due to Russia’s suspension of a deal that permitted the export of commodities from conflict-ridden Ukraine through the Black Sea.
In addition, soybean oil prices are also increasing due to adverse weather conditions in the US, which have negatively impacted soybean production in the country. The US is known as a major producer and exporter of soybeans.
Following Russia’s decision on July 17 to withdraw from the year-old agreement permitting the movement of grains and other foodstuffs through the Black Sea despite the Russian naval blockade, shipments of sunflower oil to India have come to a halt. Adding to the predicament, within the next two days, Russia carried out bombings on the Ukrainian grain port of Odesa, resulting in the reported destruction of over 60,000 tonnes of grain.
India meets its domestic demand for sunflower and soybean oils through imports. However, following the suspension of the deal, there has been a notable surge in sunflower oil prices, with an increase of nearly 8%.
“Prices of both sunflower and soyabean oils have started moving up,” said Sandeep Bajoria, Bajoria, CEO of Sunvin Group, a vegetable oil brokerage and consultancy firm. “If Russia does not extend the grain deal, then prices of sunflower oil go up further. On the other hand, dry weather conditions in the US have driven up the prices of soyabean oil by 5% in the last week.”
According to Bajoria, during the ongoing oil year spanning from October 2022 to November 2023, the demand for sunflower oil is projected to reach 3 million tonnes, a significant rise from the previous year’s 2.3 million tonnes. This increase in demand can be attributed to the lower cooking oil prices experienced compared to the previous year, which led to a growth in oil consumption. It’s worth noting that India typically imports around 14.5 to 15 million tonnes of oil annually.
Russia’s move has also put the consumer staple companies in a spot. “Even though the prices of imported sunflower oil have increased from $960 per tonne to $1030 per tonne in the last three to four days, we cannot increase prices at the retail end immediately,” said Pradeep Chowdhry, managing director of Gemini Edibles & Fats.
Following Russia’s withdrawal from the Black Sea grain deal, global wheat prices experienced a sharp increase. On Wednesday, wheat prices on the European stock exchange surged by almost 9% compared to the previous day, reaching $284 per tonne.
US wheat futures witnessed a significant surge of 8.5%, marking the highest daily increase since the outbreak of the war in February of the previous year.
“Prices of wheat are expected to go up by 15% in the next three to four months,” said Anjani Aggarwal, past president of the Roller Flour Millers Association of India. “The suspension of the grain deal will further give a fillip to the price hike.”
Simultaneously, the dry weather conditions in the US are a cause of concern for the Indian edible oil industry. As per the US Department of Agriculture’s June 30 acreage report, there is a 4.6% reduction in soybean acreage compared to the previous year, with the current figure standing at 83.5 million acres.