Agri Biz
Despite significant drops in global markets, palm oil prices are still high
The price of palm oil has dropped drastically by at least Tk3,500 per maund in the international market in the beyond four months, but the commodity is still selling at a higher rate in the domestic market.
Although the booking price is decreasing every day, it has remained static in the domestic market for the past three weeks, having eased by only Tk1,500, according to brokers.
In Malaysia, the world’s largest palm oil producer, it is currently selling at RM3,690 per tonne, which was RM7,500 in May. As such, market data shows the booking rate has almost halved in the last four months.
Adding the costs of transportation and refining to the international booking rate, the average price in the country stands at Tk3,800 currently, said shippers and brokers.
But it is selling for Tk4,800 at the mill level and for Tk5,500 at the wholesale level. That means importers are making an extra profit of Tk1,000 per maund (40.90 liters) of palm oil.
When Indonesia announced a ban on palm oil exports on 28 April, the edible oil market in Bangladesh became unstable immediately and the price jumped by up to Tk800 per maund within just two days.
On the day of the announcement, palm oil was selling for Tk6,200 at Chattogram’s Khatunganj, one of the country’s largest wholesale hubs for household essentials but the price jumped to Tk7,000 on 1 May.
Consumers complain that as soon as the price of edible oil goes up in the international market, importers and traders increase the price in the domestic market without any delay. But when the global price drops, it does not make any effect on the local market even for a few months. In this way, consumers are constantly getting washouts.
Advocate Akhtar Kabir Chowdhury, president of the Chattogram Chapter of Transparency International Bangladesh, alleged when the price goes up in the world market, importing companies put pressure on the government regulatory agencies to adjust prices at the wholesale and retail levels.
“The pump oil price has dropped in the global market for the last four months, but the price has not decreased to that extent in the domestic market. The companies are robbing the rights of the consumers by making an additional profit of Tk1,000 on each maund of edible oil,” he added.
Pradeep Karan, deputy general manager of Citigroup, an edible oil importer and edible oil packaging company, said the demand for the product in the wholesale market has decreased slightly due to the drop in the prices in the global market.
“Products that are currently available in the market were bought at higher prices earlier. As a result, even though the demand has dropped, importers are unable to reduce the price,” he added.
Pradeep Karan claimed that the price at which the product is being sold is lower than the price set by the government.
Analyzing the international market, it has been found that the price of edible oil is decreasing almost every day in the international market. In just ten days, the booking price of palm oil per tonne has fallen by more than RM600, which has decreased by RM3,800 in the last four months.
According to mpoc.org.my data, on 8 September crude palm oil was booked at RM3,690 per tonne in the international market. On 24 August, the booking price was RM4,308. Accordingly, the booking price has decreased by RM618 in ten days.
Traders said after selling at record prices in March-April, the edible oil market has started to ease slowly. Now the price is decreasing every day. But the price has not decreased much in the domestic market.
Mahbubul Alam, president of the Chattogram Chamber of Commerce and Industries, said after an increase, the price of any product, including edible oil, returns to stability gradually. This is the norm of the market.
He said importers should also reduce the price of the product due to the decrease in the global market and in this case, the regulatory authorities have the most important role to play.
“Regulatory agencies should carefully adjust the prices in the domestic market with the international market. Because, the current price drop in the world market can also put importers at great risk,” he added.
The Bangladesh government has allocated Tk 385 billion for agricultural development over the next three years, aiming for an average annual growth of 10% in the sector by the 2025-26 fiscal year. This investment underscores agriculture’s crucial role in ensuring food security and driving equitable economic growth, according to the ‘Medium Term Macroeconomic Policy Statement (2023-24 to 2025-26)’.
Despite its declining share in GDP, agriculture remains vital for the livelihoods of the majority, especially in rural areas. To enhance food production and resilience against challenges, the government’s strategy includes developing high-yield and adversity-tolerant crop varieties, expanding mechanization and irrigation, and improving access to affordable inputs such as seeds and fertilizers.
The policy document highlights various initiatives aimed at modernizing agriculture through technology. These include prioritizing surface water over groundwater for irrigation to conserve resources, integrating renewable energy solutions, and utilizing remote sensing for crop monitoring.
The government continues to support the sector through subsidies, financial incentives, and technological innovations to establish a sustainable and self-reliant agricultural framework.
The fisheries and livestock sub-sectors also make significant contributions, accounting for 2.53% and 1.91% of GDP, respectively, while providing essential protein sources and livelihoods for over 12% of the population. Achievements in these areas include achieving self-sufficiency in fish, meat, and egg production, with milk production expected to follow suit. Moreover, these sectors play a crucial role in foreign exchange earnings through exports.
Looking ahead, the Ministry of Livestock and Fisheries plans to launch development projects to enhance production capacities, adopt advanced management technologies, and improve conservation efforts, particularly for young hilsa fish (‘jatka’).
Water resource management is another focal point, given its importance for sustainable agriculture. Initiatives are underway to improve surface water availability by excavating water bodies and enhancing coastal afforestation to secure equitable water shares from transboundary rivers.
With climate change posing significant economic risks, projected to reduce GDP by 6.8% by 2030, the government has prioritized comprehensive strategies to mitigate these impacts. The Mujib Climate Prosperity Plan aims to equip vulnerable sectors and communities with tools to enhance resilience and stability against climate-related disruptions.
Through these multifaceted efforts, Bangladesh is taking decisive steps to safeguard and advance its agricultural heritage amidst evolving global challenges.
The International Finance Corporation (IFC) is investing US$30 million in Pran Dairy Limited (PDL) and Habiganj Agro Limited (HAL), both part of the PRAN Group, a leading player in the food and beverage industry (F&B) in Bangladesh. This investment aims to support severely impacted businesses, particularly those reliant on imports for raw materials. The goal is to enhance the resilience of the food processing market, create jobs, foster gender diversity, and strengthen the economy.
This marks the first time IFC’s USD term loans will be utilized for working capital purposes in Bangladesh. These funds will enable PDL and HAL to sustain their operations, increase exports, and preserve over 30,000 jobs, as stated in a press release today. Additionally, IFC will assist PRAN Group in enhancing women’s participation and inclusion in the workplace through relevant policies and practices. The F&B sector plays a crucial role in Bangladesh’s economy, accounting for about 13 percent of manufacturing production value and employing 19 percent of the industrial manufacturing workforce, with a projected compound annual growth rate of 12 percent.
However, challenges such as foreign exchange shortages, high energy prices, and power shortages have disrupted the import of raw materials and constrained local commercial banks’ lending capacity. In response, IFC’s longer-term US dollar financing aims to improve access to foreign exchange, helping Bangladeshi companies navigate the crisis.
Uzma Chowdhury, director (Finance) of PRAN-RFL Group, emphasized the importance of regular access to US dollars for a net importer like PRAN Group. Given the current shortage, accessing USD funds for working capital has been challenging. IFC’s provision of scarcely available US dollar working capital will ensure the long-term stability of the company’s operations and contribute to the country’s economic stability.
As part of its advisory services, IFC will also support PRAN Group in developing the company’s smallholder sourcing supply chain in Bangladesh and identifying opportunities to decarbonize its agro-processing operations, among other initiatives.
Martin Holtmann, IFC country manager for Bangladesh, Bhutan, and Nepal, reiterated IFC’s commitment to supporting clients during crises. He stated that IFC’s financing aims to alleviate the lack of access to foreign exchange while promoting private sector growth in Bangladesh. This investment is expected to enhance food security, prioritize support for strategically important industries, diversify Bangladesh’s export base, create jobs, expand market opportunities, and enhance economic resilience.
Since 2010, IFC has invested over US$3.8 billion to help the private sector grow in Bangladesh.
The mango formation process is progressing smoothly in Rajshahi and Chapainawabganj districts, signaling the imminent arrival of the beloved juicy fruit within the next couple of months, thanks to favorable climatic conditions.
Fruit setting is advancing well, with many mango trees already displaying visually appealing appearances in orchards, gardens, and homestead areas.
The Department of Agriculture Extension (DAE) reports abundant buds in the new mango orchards of Naogaon this year, although fewer buds have appeared on the larger trees in Rajshahi and Chapainawabganj. Mango cultivation spans across 93 thousand hectares of land in Naogaon, Rajshahi, and Chapainawabganj.
According to DAE Additional Director Mahmudul Faruque, over 50 percent of the buds have transitioned into pods in the region. In Rajshahi, 65 percent of mango buds are currently pea-sized, while 35 percent are marble-sized.
Dr. Shafiqul Islam, principal scientific officer of the Fruit Research Station, attributes the reduced bud count this year to last year’s bumper crop, resulting in less food storage in the trees. However, this decline in production is expected to yield larger mangoes of superior quality.
He notes a delayed appearance of buds on trees due to an extended winter, with buds emerging later than usual, primarily in late February.
An irregular distribution of buds is also observed, with some trees exhibiting full coverage while neighboring trees remain bare, with only new leaves emerging. This pattern extends to individual trees, where one branch may be adorned with buds while others remain barren.
Mango grower Shafiqul Islam Sana expresses disappointment as fewer buds have appeared on trees compared to last year, attributing some bud loss to hailstorms. Despite this setback, he remains hopeful for a fruitful harvest.
Upazila Agriculture Officer Shafiullah Sultan highlights the potential for better quality mangoes if at least 20 percent of the pea-sized pods survive, emphasizing the importance of proper orchard care and pest control.
Similar conditions are reported in Charghat upazila, where farmers observe leaves but few mango pods on their trees. Despite challenges, proactive measures such as pesticide spraying are being undertaken to ensure successful mango production.
With a proactive approach, mango grower Abdur Razzak is diligently caring for his trees, noting pod appearances on a significant portion of his orchard.
Yadul Islam, who rents mango trees within the field of Bangladesh Council of Scientific and Industrial Research, reports good bud formation this year, expressing optimism about meeting mango production targets with proper care and management despite natural challenges.
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