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One of the few positives for Indian consumers of US President Donald Trump’s sweeping tariffs on foreign trade partners is the drop in landed price of key edible oils in India in the last few weeks.
Ever since the Trump administration hiked tariffs on imported items earlier this month, the landed price of palm oil in India, both in crude and refined forms, have softened by almost 7-8 per cent, trade data suggests.
Landed price of crude soybean oil, the other major variety of edible oil imported by India, has also dropped by almost $48 per tonne between April 11 and 21.
So much so, the premium that soybean oil was commanding over palm oil for some time till the middle of last year has all but vanished.
In fact, as on April 21, the landed price of crude palm oil and crude soybean oil was almost identical, as per trade data.
This could have an impact on India’s edible oil markets and food inflation as well, as the country is a major consumer of edible oils.
Oils and fats have a weightage of 4.21 per cent in CPI-rural basket and 2.81 per cent in CPI-urban basket, data shows.
A major reason for softening of the global edible oil markets is the sharp drop in crude oil rates over fears of a recession gripping the world economy due to uncertainty over Trump’s tariff impact.
Traders said if crude oil prices stay around $60-65 per barrel, diversion of vegetable oils for making biodiesel becomes unviable.
“Therefore, even if a fraction of vegetable oils earmarked for making biodiesel comes back into the system for edible purposes, it will increase global supplies, further dampening prices,” BV Mehta, Executive Director of Solvent Extractors Association of India (SEA) and a well-known authority in the field of edible oils told Business Standard.
Mehta said that before Trump’s tariff war, the world was expecting around 62 million tonnes of vegetable oils to be diverted for making biodiesel in 2025, which now seems to be around 60 million tonnes.
“This means that oil available for edible and other purposes will go up by that much amount which is keeping global markets on the edge as far as prices are concerned for now,” Mehta said.
Mehta said, globally, around 200-220 million tonnes of vegetable oils are used for edible purposes annually.
He said the only supportive factor for prices is Indonesia’s commitment to pursue its B-40 programme of 40 per cent biodiesel blending for which it is subsidising palm oil rates.
“Presently, as per our calculations, Indonesia gives a subsidy of around $300-400 per tonne for fulfilling its bio-diesel commitment. This subsidy will have to go up if crude oil rates hover around $60 per barrel under the impact of Trump’s tariff war,” Mehta said.
In April 2024, the average landed price of crude palm oil in India was $999 per tonne (C&F, Mumbai), while that of crude soy oil was $989 per tonne (CIF, Mumbai).
RBD palmolein oil was priced at $972 per tonne (C&F Mumbai) in April last year. “This means prices have further scope of going down,” another trader said.
SOFT CRUDE
Immediately after April 2, when the United States unveiled retaliatory tariffs both global benchmark Brent crude prices as well as US benchmark WTI prices fell to four-year lows over weak industrial demand.
As on Wednesday, Brent crude futures stood at $68.4 per barrel at the time of writing this report, having climbed in the previous week, data from the Intercontinental Exchange Futures Europe platform shows.
However, this is still 5.5 per cent lower than prices a month ago, and 12.2 per cent and 9.5 per cent lower than where prices were 3 and 6 months ago, respectively.
While prices are expected to remain volatile, they will remain broadly soft owing to multiple challenges.
“Oil prices have come under pressure as tariff tensions heighten concerns over slowing demand, while progress in US-Iran nuclear talks has eased some supply risks,” Chintan Mehta, CEO, Abans Financial Services Ltd said.
Last week, JP Morgan lowered its oil price forecasts for 2025 and next year, citing higher production from OPEC plus and weaker demand.
The bank cut its 2025 Brent price forecast to $66 per barrel from $73 and its 2026 target to $58 from $61.
