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Informist, Tuesday, Sept. 1, 2026

 

By Krupa Biju and Abhijit Doshi

 

MUMBAI – The factors that have lifted prices of edible oils in recent months are likely to remain influential for some more time. Nonetheless, market participants expect prices to remain volatile, with occasional corrections.

 

Prices of edible oils in India have risen, in some cases rather sharply, in recent weeks, driven by a combination of firm global palm and soybean oil prices, expectations of higher biodiesel consumption in Indonesia, weather concerns in Southeast Asia, and strong buying by Indian refiners ahead of the festival season.

 

Across the country, groundnut oil, soyoil, palm oil, and mustard oil are the edible oils that are majorly consumed. As of Aug. 31, the average daily wholesale price of groundnut oil rose over 7% to INR 19,758.45 per 100 kg from INR 18,394.05 per 100 kg six months ago, data from the Department of Consumer Affairs showed. Mustard oil prices rose nearly 9% to INR 19,132.71 per 100 kg from INR 17,587.45. Similarly, soyoil rose over 9% to INR 15,539.31 per 100 kg from INR 14,196.27, and palm oil prices rose by over 10% to INR 14,185.27 per 100 kg from INR 12,878.76, according to the data.

 

Prices in India reflect the global trend. In early August, the Bursa Malaysia Derivatives palm oil contract for November had touched around 5,031 ringgits (INR 118,229) per tonne, its highest level since December 2024, before easing to around 4,862 ringgits (INR 114,257) Tuesday. The Chicago Board of Trade soybean oil is currently more than 15%  below its May highs, Ritesh Kumar Sahu, analyst at Kotak Neo, said.

 

Although the market saw occasional corrections in the meantime, they were merely temporary, and the broader market remains firm, market participants said, adding that occasional corrections may continue. India's heavy dependence on imports of edible oils makes it vulnerable to price movements in global markets. The country imports more than 60% of its edible oil requirement, making domestic prices highly sensitive to movements in global palm, soybean, and sunflower oil prices. "Since India imports more than 60% of its edible oil requirement, changes in global palm and soybean oil prices are quickly reflected in domestic landed costs," said Ravi Shankar Pandey, senior commodity consultant at Brigid Agro LLP.

 

INDONESIAN TRIGGER

The biggest structural factor behind the recent global rally has been Indonesia's decision to increase the palm oil component in its biodiesel programme to 50%, known as B50. A larger share of local production being consumed domestically by the world's largest palm oil producer and exporter means less palm oil is potentially available for export, tightening global supplies.

 

Indonesia's B50 programme is "emerging as a key support for palm oil prices", according to Sahu. Indonesian domestic palm oil consumption is expected to rise to around 23.8 million tonnes in 2026-27 from 23.2 million tonnes in 2025-26, the analyst said. At the same time, Indonesian palm oil production is expected to increase only modestly. This means additional domestic consumption could come partly at the expense of exports. "The bigger point is that Indonesia is consuming more palm oil at a time when production is growing only modestly," Sahu said.

 

The impact is significant for the global edible oil market because palm oil competes with soybean and other vegetable oils; any tightening in palm oil supplies can lift prices across the complex. Pandey said B50 was a "significant bullish factor" because it increases Indonesian palm oil consumption and reduces the quantity available for exports. But he cautioned that the current rally was not driven by biodiesel alone.

 

WEATHER, CRUDE OIL

Another key instrument in price volatility is weather. In Indonesia and Malaysia, which are the world's two largest producers of palm oil, El Nino-related dryness has raised fears of lower palm yields. "The current rally is not driven by biodiesel demand alone; it reflects the combination of higher domestic Indonesian consumption, weather risks and tighter supply expectations," Pandey said.

 

According to Sandeep Bajoria, chief executive officer of commodity trading firm Sunvin Group, the main drivers of the recent rise in prices were Indonesia's B50 programme and El Nino-related weather concerns, while higher crude oil prices provided an additional push. Crude oil also plays a crucial role in this phenomenon. Higher crude prices improve biofuel profitability and therefore support demand for vegetable oils used in biodiesel. "Crude also had gone up from $80 to $85-$86," Bajoria said.

 

The relationship between crude oil and vegetable oil is important because a significant portion of major vegetable oil production is increasingly linked to biofuel demand, making energy prices an important influence on edible oil markets.

 

FESTIVAL DEMAND

A strong pick-up in demand ahead of the festival season in India has provided another important source of support for edible oil prices. India's crude palm oil imports jumped 50% month-on-month to 730,965 tonnes in July, according to the Solvent Extractors' Association. Total edible oil imports rose 33% to a 10-month-high of 1.48 million tonnes from June. Indian refiners have been building inventories for Sept-Oct when demand typically rises around Navratri, Dussehra, and Diwali.

 

But the interesting point is that Indian traders are simultaneously buying large quantities of oil even as domestic prices have started to decline, giving an indication of their assessment of prices over the next few months. Bajoria said vegetable oil arrivals are running at very high levels. Imports exceeded 1.5 million tonnes in July, with August arrivals estimated at 1.60-1.70 million tonnes and September arrivals at around 1.70 million tonnes. "We are going to be tanked up and stocked up very well for the festival season in India," Bajoria said, even while adding that storage capacity at ports could itself become a problem.

 

Additionally, higher landed costs, and freight and insurance expenses have kept Indian prices elevated, according to Pandey. The Indian government also acknowledged that the war in West Asia has affected edible oil prices, particularly through disruptions around the Strait of Hormuz, he said.

 

The kharif acreage of oilseeds in India is not too encouraging. As rainfall plays truant, oilseed sowing has been lagging year-on-year. Total oilseeds sowing as of Friday was 0.5% down on year to 19.05 million hectares. With the kharif sowing season almost over, the gap is seen persisting.

 

CORRECTION, NOT REVERSAL

Global palm oil has now retreated from its recent high. Sahu said the latest decline was partly triggered by a sharp fall in Chicago soyoil prices. Since soyoil and palm oil compete in the international market, weakness in soyoil can quickly put pressure on palm oil. Lower crude oil prices have also weakened the biofuel premium, the analyst said. Technically, palm oil could correct towards 4,855-4,800 ringgits (INR 114,093-INR 112,800) a tonne, Sahu said. However, unless prices break that support zone, the broader bullish trend remains intact.

 

Bajoria described the fall as a "healthy correction", rather than a trend reversal. "Trend reversal, I cannot call it immediately," he said, pointing to the larger impact that still needs to be seen from B50. Pandey also believes the recent fall is more likely to be a short-term correction than a fundamental change in direction. Profit-taking, softer near-term demand, and lower crude oil prices have taken some heat out of the market.

 

GOING FORWARD

The outlook for edible oils is therefore mixed. Sahu expects edible oil prices to remain firm but sees the possibility of occasional profit-taking and periods of consolidation rather than a one-way rally. But Bajoria is more bearish on the domestic market. With large quantities of vegetable oil arriving in India, he expects domestic edible oil prices to remain under pressure over the next few months, even though international prices could behave differently.

 

Pandey, meanwhile, expects the Indian market to remain firm during the festival season. He estimates refined soybean oil at the retail level could move towards INR 1,550-INR 1,600 per 10 kg, while crude palm oil could remain around INR 1,400-INR 1,450.

 

The longer-term picture will depend on whether rising biofuel demand can outpace production growth. The key variables will be biofuel consumption, palm production, competing oilseed supplies, weather, and global import demand, Sahu said. Indonesia's B50 programme provides a structural floor to prices, but a recovery in production could eventually absorb the additional demand, he said. Pandey similarly expects the market to remain structurally firm but volatile. Higher production in Indonesia and Malaysia, abundant soybean supplies, weaker Chinese demand, or lower crude prices could all trigger corrections.  End

 

US$1 = INR 94.95

Edited by Shubhayan Bhattacharya

 

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