Pakistan’s edible oil and oil seeds trends

29.01.2018

Palm oil is a significant import of Pakistan’s and has crossed the $1 billion in the first half of the fiscal year. The latest numbers posted by PBS showed an increase of 23 percent in palm oil imports as compared to the same period year.

One reason behind the higher imports is that the Malaysian RM appreciated in the last quarter of 2017. However, imports of palm oil increased by more than 200,000 tons as well therefore the higher import was driven more by higher volume than a higher price. One reason behind its growth is the increase in demand by non-traditional segments such as tea whiteners.

Among edible oils, it is the trend in soybean oil imports that is standing out the most. Soybean oil imports have nearly tripled in volume while the rise in dollar value was by 76 percent when compared to the first half of FY17.

Part of the reason behind higher soybean oil imports is the lower international price due to increasing in soybean production in South America; on average the price has gone down by about $600 per ton on a year-on-year basis. Since soybean oil is interchangeable with other soft oils such as sunflower and canola, the decrease in price has allowed it to increase its share in imports.

In Pakistan, the demand for soybeans is driven by the poultry sector. Soybeans are crushed to obtain vegetable protein which is used as poultry feed. The crushing of soybeans produces oil which is absorbed by the edible oil market. There has been some talk of a special incentive package for the poultry sector to be announced this year. Increase in poultry exports would increase the demand for soybean seeds.

Though soybean was introduced as an oilseed crop in the 1960s, it did not flourish. Among oilseed crops, Pakistan has cottonseed, rapeseed/mustard, sunflower and canola. In the last fiscal year, there was a decline in the production of oil seeds and a decline of 5.93 percent was posted.

Cottonseed dropped by about 14 percent due to a decline in sowing area after pest infestations and lower domestic prices at sowing time resulted in losses to farmers. Similarly, the area under cultivation for rapeseed and mustard was lower in FY17 due to higher prices of sugar cane and maize.


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