With shipments from top producers Russia and Ukraine facing delays of up to 60 days and prices rising, according to traders, the country is turning to South American suppliers and to rival oils like palm and soy to plug the import gaps.
Attacks in the Black Sea are “definitely affecting us,” said Mannan Khan, director of MK Agrotech Pvt. Ltd., a vegetable oil importer and distributor in the southern Indian city of Mysore. Dozens of his shipments, especially from Russia, have been delayed, he added.
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The company was forced to source half its sunflower supply from Argentina as violence in the Black Sea region intensified in the past month. Khan is also “betting on” Australian canola oil, subbing it in for 3-4% of his firm’s total import volume, with plans to raise it further.
The pivot is expected to help meet rising demand in India ahead of festival season starting next month. But it also stands to further tighten a global vegetable oil market already facing supply risks from a strong El Niño and higher biofuel demand, potentially lifting consumer prices.
ALSO READ | India summons Ukraine envoy after Black Sea drone strike kills seafarerSunflower oil, used in cooking and biofuel, made up about a fifth of India’s total vegetable oil imports in the first half of the year, according to the Solvent Extractors’ Association of India. The majority — about 1 million tons — came from the Black Sea region.
Ukraine has stepped up drone attacks on Russia-linked shipping infrastructure and vessels in the Black Sea, prompting Moscow to warn that it’s unsafe to navigate in the waters. Meanwhile, the third-largest exporter of sunflower oil in Ukraine last week suspended operations, citing a sharp intensification of Russian missile and drone attacks on port and logistics infrastructure. Together, the two countries accounted for 63% of global sunflower oil exports last season, according to the US Department of Agriculture.
The disruptions have pushed India’s local sunflower oil price index up 6% this month, widening its premium over palm and soy.
Demand is now starting to shift to rivals, according to Aashish Acharya, vice president at Patanjali Foods Ltd., one of the country’s top vegetable oil buyers. Imports of palm oil are expected to jump around 40% on a monthly basis to 700,000 tons in July, while a higher-than-normal 500,000 tons of soy oil is expected to come in every month, he added.
Meanwhile, India’s own oilseed planting has lagged due to a below-average monsoon, according to official data. That’s likely to hit output and increase the country’s reliance on imports. This comes as the global vegetable oil market is facing supply constraints on several fronts, including hot and dry weather wrought by a ‘super’ El Niño and expanded biodiesel mandates in Indonesia and Malaysia, the world’s biggest palm oil producers.
“India’s import requirements will be large,” said Khan from MK Agrotech, adding that he expected prices to “stay firm and likely firm further.”