The palm oil sector is set to miss out on a traditional period of high demand as COVID-19 lockdowns during the Muslim holy month of Ramadan affects demand in key importing countries such as India, Pakistan and Bangladesh, Reuters reported on 21 April.
Lower than normal demand could put pressure on Malaysia’s benchmark crude palm oil prices, which had already fallen nearly 30% since 23 January – the date when China, the second largest global palm oil consumer, started the world’s first COVID-19 related lockdown.
Palm oil demand typically increased in the two months before Ramadan, which began on 23 April this year and ends with Eid al-Fitr on 23 May. Importers usually stocked up on the edible oil in anticipation of increased food consumption as families and friends met in communal feasts to break their daily fasts, Reuters said.
With people under lockdown unable to gather as normal this year – and with many restaurants, canteens and hotels shut – iftar, or break-fast meals, were expected to be on a smaller scale.
Traders and analysts told Reuters that purchases from major Ramadan buyers in India, Bangladesh, Pakistan, Saudi Arabia and Iran had picked up in early March, but had slumped since governments had enacted lockdown measures.
“We have lost that window for Ramadan demand to pick up, we should have seen a lot higher shipments to the Middle East in the beginning of March,” Sathia Varqa, owner of Singapore-based Palm Oil Analytics, was quoted as saying by Reuters.
March palm oil exports from Malaysia, the world’s second largest producer, had fallen 27% from a year earlier to 1.2M tonnes, the lowest volume for March since at least 2016, according to Malaysian Palm Oil Board data.
Top producer Indonesia’s March exports had been higher than in February but had fallen 3% from a year earlier to 1.9M tonnes, according to Refinitiv data.
With buyers in the Middle East under lockdown, Varqa told Reuters it was difficult to see a seasonal peak.
In India, the world’s biggest edible oil consumer, the hotel, restaurant and catering industry was a major user of palm oil, but demand from this sector had fallen as much as 40% due to a nationwide lockdown, according to analysis by the Malaysian Palm Oil Council (MPOC).
Indian palm oil demand usually increased around 10% during festivals such as Ramadan, but such an increase was unlikely this year, Sudhakar Desai, president of the Indian Vegetable Oil Producers’ Association (IVPA) told Reuters.
“For the first time this year we will see a fall in per capita consumption,” Desai said.
The country’s palm oil imports in March had fallen 58% from a year earlier to 335,308 tonnes according to data compiled by industry body the Solvent Extractors’ Association.
In April, India’s palm oil imports could plunge to 450,000 tonnes from 707,450 tonnes a year earlier, IVPA’s Desai told Reuters.
Pakistan’s palm oil imports in March had been 40,000-50,000 tonnes lower than forecast, while trading in Bangladesh’s local market had been slow since mid-March, according to MPOC analysis.
“Purchasing power is falling. People are losing jobs or witnessing pay cuts. This will have an impact on palm consumption,” a Mumbai-based dealer with a global trading company told Reuters.