Palm oil price still high despite significant global drop

The price of palm oil has dropped drastically by at least Tk3,500 per maund in the international market in the past 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 traders.

In Malaysia, the world's largest palm oil producer, it is currently selling at 3,690 ringgit per tonne, which was 7,500 ringgit 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 importers and traders.

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 on per maund (40.90 litres) 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 losers.

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.

Analysing 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 600 ringgit, which has decreased by 3,800 ringgit in the last four months.

According to mpoc.org.my data, on 8 September crude palm oil was booked at 3,690 ringgit per tonne in the international market. On 24 August, the booking price was 4,308 ringgit. Accordingly, the booking price has decreased by 618 ringgit 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.