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.
Bangladesh Prime Minister Sheikh Hasina has asked all concerned to find a way out to ensure sustainable export growth and explore new global markets for Bangladeshi goods in the wake of the Russia-Ukraine war.
The Prime Minister made the call while speaking at the 11th meeting of the National Committee on Export, at her official residence Ganabhaban in Dhaka on Monday (20 March).
PM said, “Steps will have to be taken to achieve sustainable export growth after analysing situation steamed from the global economic recession due to the war in Ukraine,” she told the 11th meeting regarding export at her official Ganabhaban residence here.
The prime minister also urged all concerned to diversify the export items and explore new markets for those alongside revitalising the local markets.
“A new scope has been created globally to explore new markets for Bangladeshi items due to enhanced demands for goods because of the war in Ukraine. We have to grasp the markets,” she added.
The premier also called for formulating a new export policy for another 4 or 5 years by revising, changing and improving the existing one going to expire by 2024.
She said the new export policy should be adopted by analyzing the ongoing global economic recession, sanctions, counter-sanctions for the war and the challenges and scopes possibly to be created in Bangladesh after the graduation from the LDC by 2026.
Presently, the consumers will have to spend more money than usual in case of purchasing dates and other fruits—two essential items in iftar during Ramadan, due to importers’ difficulty in opening letters of credit (LCs) on time.
Price hike is a most common phenomenon ahead of the month of Ramadan in Bangladesh, and this year even more due to the LC opening crisis.
Already, the price of dates has doubled in the wholesale and retail markets and it will be more expensive ahead of Ramadan, said some businessmen.
The price of all types of dates has hiked in the local markets ranging from Tk 40 to Tk 160 per kg while different fruits range from Tk 30 to Tk 100 per kg.
Some traders said the prices of these essential iftar items will increase further during the month of Ramadan as they are facing difficulties in opening LCs which will push up the prices of dates and fruits.
According to the sources at Trading Corporation of Bangladesh (TCB), the price of dates increased by 20 percent compared to the last year.
Milton, a shop owner in the Baridhara area, said “The price of dates went more expensive in the past month ahead of Ramadan and I was able to purchase a limited amount of dates due to the soaring price of it.
He also feared that the price of dates would be soared further in the month of Ramadan.
Habibur Rahman, a fruit trader said the price of every fruit has increased.
Whatsoever, ajwa variety of dates is being sold at Tk 750-800 which was available at Tk 600-700 last year. Mariam variety of dates is being sold at Tk 800-850 while the premium variety of dates is being sold at Tk 1000-1200 per kg.
According to the statistics of Bangladesh Bank, the import of dates has fallen by almost half compared to the demands of it but during Ramadan the demand for dates is about 50,000 tonnes.
In the past three months, only 22,000 tonnes of dates were imported which is 46 percent less than the last year. However, the authorities concerned related to import dates have opened LC of 29,000 tonnes dates in January, said sources at Bangladesh Bank.
Sirajul Islam, president of Bangladesh Fresh Fruits Importers Association, said the demand for dates increases three to four times during the month of Ramadan. Besides, there is a demand of 50,000-70,000 dates in the country in a year while 40,000-50,000 is needed in Ramadan alone, he said.
Referring to the opening of LC, Sirajul said “This year the traders faced difficulties in opening LCs in time as they had to open it by paying 100% cash margin while it was 5 percent. The small traders are the worst sufferers in opening LCs.”
The dates are being imported from the Middle East and Africa and dates were being stocked five-six months before the Ramadan, he added.
He also said that the price of dates may increase 30 percent in Ramadan due to the dollar crisis and transport cost caused by the fuel price hike.
If the government will take steps in unloading dates in ports on a priority basis, then there will be no instability in the market, said Sirajul.
Contacted, Commerce Minister Tipu Munshi, said “We’ll take necessary steps so that the consumers can purchase dates, the most essential items in iftar, at a tolerable price.”
He also assured of keeping monitoring the market to prevent volatile price hikes of dates.
Issuing a warning, the minister also said strict action will be taken against those involved in increasing the price of dates after creating an artificial crisis.
The state-run Trading Corporation of Bangladesh (TCB) has taken an initiative to sell 6 essential items to some 1 crore low-income groups of families ahead of the holy month of Ramadan.
TCB will start selling 3 essential items – edible oil, sugar, dates and chickpeas and lentils—among such families from Thursday (March 9). These essential items will be sold in two phases. In the first phase selling of the items will start from Thursday across the nation.
Commerce Minister Tipu Munshi will inaugurate the sales of essential items formally through a function at Tejgaon in the capital on Thursday.
The cardholders can buy the six goods at subsidized rates from the TCB’s specific sales points and dealers’ outlets. Any cardholder can buy 2 litres of soybean oil, 2 kg lentil, sugar, chickpea and 1 kg date at a time. All the specific card holders can buy sugar at Tk 60/per kg, date at Tk 100, lentils at Tk 70, chickpeas at Tk 50 and soybean oil at Tk 110 per liter.
