Home ›› 08 May 2022 ›› Front
Bangladesh’s edible oil imports rose by 77,000 tonnes year-on-year in the first nine months of FY22, but instead of easy access to this kitchen essential, domestic consumers have been grappling with severe supply shortages and prices that exceed international rates.
A latest commerce ministry report, quoting central bank data, shows that the refiners opened LCs (letters of credit) for 14.75 lakh tonnes of edible oil during the July-March period this fiscal year, and imported 12.30 lakh tonnes of the kitchen ingredient.
The country had imported 11.53 lakh tonnes of edible oil against LCs opened for 14.53 lakh tonnes in the same period of FY21. Analysis of the data clearly shows that there should be no shortage of this essential commodity in the domestic market, but the reality is quite different.
Moreover, according to the Bangladesh Trade and Tariff Commission, and Trading Corporation of Bangladesh, a litre of unrefined soybean oil in the international market currently costs around Tk 159.21 and refined variety around Tk 168.40 – when rates are converted from USD.
However, Bangladeshi consumers are now paying more than Tk 200 for per litre of loose and bottled soybean oil in local markets, which is an increase of Tk 31.60 per litre when compared to global rates.
A litre of palm oil was being sold for Tk 145.50 per litre in the international market back in April this year, but local consumers are now paying Tk 175 – Tk 180 per litre for the same item.
On Thursday, the Bangladesh Vegetable Oil Refiners & Vanaspati Manufacturers Association raised the price of refined bottled soybean oil by Tk 38 per litre to Tk 198, price of the loose variety to Tk 180 per litre, and palm oil to Tk 172 per litre.
But due to the ongoing supply crunch, the actual sale price of edible oil in local markets far exceeds the newly fixed prices.
A number of wholesalers told The Business Post that the edible oil currently available in the market was imported back in March this year.
According to the World Bank’s Commodity Price data, the price of soybean oil and palm oil rose by 22.61 per cent and 16.75 per cent respectively in the international market this March, when compared to February 2022.
However, during the same period the price of soybean and palm oil in Bangladesh’s markets increased by 28.57 per cent and 32.30 per cent respectively.
Record rise in edible oil prices
Industry insiders say the last time edible oil prices skyrocketed was back in 2008, when the price of unrefined soybean oil rose to the then highest $1,540 per tonne in the international market. That year, the global price of palm oil also rose to the then highest $1,380 per tonne.
Bangladesh had suffered an edible oil shortage during that time as imports of this kitchen essential fell significantly.
The price of per tonne soybean oil in the international market was $1,948 in April, $1,957 in March, and $1,596 in February. Besides, the global price of per tonne palm oil was $1,683 in April, $1,777 in March, and $1,522 in February.
The Consumers Association of Bangladesh’s documents show that the price of bottled soybean oil rose to its highest Tk 135 per litre in the 30-year period until 2021, and now the item is being sold for Tk 200 per litre.
An analysis of the last three decades of market data shows that consumers across the globe are now paying record high prices for edible oil, and Bangladeshi shoppers are paying even more compared to the already high international rates.
According to industry insiders, Bangladesh imports most of its soybean oil from Argentina and Brazil, while Malaysia and Indonesia fulfill most of the country’s palm oil demands.
Indonesia’s recent move to ban all exports of palm oil triggered further instability in Bangladesh’s edible oil market. Some traders claimed that the Eid holidays had impacted edible oil supply in the markets.
Insiders further claimed that the edible oil prices have been rising due to several factors, mainly due to Indonesia’s recent ban on palm oil exports, climbing prices in the international market, and a supply chain disruption triggered by the delay in local price readjustment.
Speaking to The Business Post, Commerce Ministry Senior Secretary Tapan Kanti Ghosh said, “The usage of edible oil declined last FY due to the impacts of the Covid-19 pandemic. This year, the use of this commodity rose as the country – especially the industries – gradually reopened.
“This in turn caused the edible oil imports and consumption to increase as well.”
He further said, “A worldwide price and supply crisis is ongoing. As we entirely depend on imports for this particular commodity, the situation will return to normal once the global crisis eases.
“Indonesia’s ban on palm oil exports has exacerbated the ongoing edible oil supply crunch in Bangladesh.”
Tapan added that the sale of soybean oil under the Trading Corporation of Bangladesh’s (TCB) programme will soon begin again, but as the edible oil prices are high, TCB will adjust the rates accordingly.
Meanwhile, a blame game between refiners, wholesalers, dealers and retailers, who makes up the supply chain, has started over the edible oil crisis in the domestic market — leaving only the consumers suffering around the country.
Although the country should have adequate stock, soybean and palm oils are not available in the market. Even if consumers manage to find some, they are paying abnormally high prices to buy them.
The crisis is yet to end even though the prices have been hiked by Tk 38-42 per litre following businesses’ demand.
Edible oil was not available in Dhaka city’s wholesale and retail markets on Saturday. Traders with some stocked oil were found charging Tk 20-24 more per litre.
Industry insiders said the crisis may end within two or three days. They said refineries will get supply orders (SO) in line with the new prices after banks open today. Retail markets will start receiving new batches after oil is collected and put in the supply chain.
Market analysis shows that the edible oil supply crisis started back in March and got worse in April as Ramadan started. The situation became more insufferable right before the Eid-ul-Fitr. As bottled oil disappeared from most of the markets, the price per litre rose to over Tk 210.
The situation is yet to return to normal even after the Eid holidays as the blame game kicked off.
What retailer say
Retailers claim that there is no oil in the market because wholesalers and dealers have stocked up and stopped supply to push up the prices.
Shibly Sayeedi, the proprietor of Bhuiyan Enterprise at Malibagh kitchen market, said, “After bottled oil, we are not getting loose oil as well. But there is no real shortage. Many wholesalers shelved the oil after learning that prices will rise after Eid.”
Mostafizur Rahman, who owns a store at Segunbaghicha kitchen market, said dealers also stopped supplying bottled oil before Eid.
What wholesalers, dealers say
However, wholesalers and dealers claim refiners stopped oil supply after the government declined their demand to hike prices.
Talking to The Business Post at Old Dhaka’s Moulvibazar, Mohammad Ali Bhutto, senior vice-president of Bangladesh Wholesale Edible Oil Traders Association, claimed, “We got no SO over the past two weeks. We are getting no oil despite repeated requests.
“Fifteen days ago, we received only 18 tonnes of oil even though we had wanted to buy 1,800 tonnes based on consumers’ demand. Since then, nothing. But there is no real supply crunch. Hopefully, the situation will normalise over the next few days,” said Bhutto, who himself is a wholesaler.
Ziauddin, the proprietor of dealer AZ Enterprise at Shantinagar, echoed the same concerns and hope.
What refiners say
Meanwhile, refiners brushed off the claims of retailers, wholesalers and dealers, and alleged that those three groups hoarded the oil and created the crisis.
They claim the supply chain never stopped but admitted that it was going slow.
Md Shafiul Ather Taslim, director of finance and operations at TK Group, told The Business Post, “Our documents say the oil supply did not stop. Mills are supplying. Even on Thursday, after the Eid, oil supplies left mills.
“The middlemen and hoarders are responsible for the crisis. Many wholesalers and dealers stocked up after buying oil at a lower price before Eid with the plan to sell them at a higher price after the holidays. The Directorate of National Consumer Rights Protection has seized those oil during raids.”
“The government needs to monitor strictly to stop price manipulation and sale of oil, which was bought at Tk 160 (per litre), at Tk 198,” he added.
Other reasons
Both oil refiners and traders also blamed several other reasons that played a role behind the absurd rise of cooking oil prices.
The refineries’ decision to bring supply down due to the difference between the administered domestic market prices and import prices and refinery costs in the international market is one of them.
The other reasons include stockpiling at wholesaler and retailer levels to jack up the prices, Indonesia’s decision to stop palm oil sales and bank closure during the Eid holidays.
How to avoid crisis?
Experts have emphasised several measures, including enhanced government monitoring to stop the sale of hoarded cheaper cooking oil at a higher rate, to end the ongoing crisis and avoid another one in future.
They also stressed that the government will have to achieve production or import capacity and prices need to be adjusted at the consumer level, whenever needed, after analysing costs and prices in the international market.
Dr Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue (CPD), said the consumers would not have suffered suddenly if the prices were regularly adjusted after the global rates went up and Indonesia stopped selling palm oil.
Ghulam Rahman, president of the Consumers Association of Bangladesh, added, “There will always be a supply crisis if traders stockpile the oil corruptly. To avoid that, the government will have to achieve the capacity to supply 25 per cent of the market demand.”
