Policy shifts, biofuel mandates and supply rigidity are reshaping pricing dynamics, says Sudhakar Desai

Global edible oil markets have entered a phase of structural volatility, driven by geopolitical trade realignments, biofuel mandates and constrained supply growth, according to Sudhakar Desai, President of the Indian Vegetable Oil Producers’ Association (IVPA) and CEO of Emami Agrotech.

Speaking at the UOB Kay Hian Conference in Kuala Lumpur on the theme “Navigating Structural Shifts in Global Edible Oils: Implications for India,” Desai said the reconfiguration of global trade corridors has compressed arbitrage opportunities and intensified the transmission of energy prices, currency fluctuations and policy shocks into edible oil markets.

“Small adjustments in duties, mandates or trade flows are now producing disproportionate price swings across the supply chain,” he said.

Tight Global Balances, Intense Inter-Oil Competition

Global production of the four major vegetable oils is projected at 208.4 million tonnes in 2025–26, only marginally higher year-on-year. While palm and rapeseed oil output is rising, sunflower oil production remains constrained, leaving global balances vulnerable to weather disruptions and policy shocks.

“This limited supply growth keeps inter-oil competition intense and price spreads unstable,” Desai said, noting that sunflower oil continues to command a premium.

Malaysia’s palm oil output is projected at 19.9 million tonnes this year, compared with 20.2 million tonnes last year, while Indonesia’s production is expected to reach 51.8 million tonnes versus 51.2 million tonnes. However, slow replanting progress in both countries could sustain near-term supply tightness through March 2026.

Biofuels Reshape Market Fundamentals

Biofuel mandates have emerged as a dominant structural driver. Indonesia’s biodiesel programme alone absorbs roughly 14 million tonnes of palm oil annually, while U.S. biofuel policies continue to anchor global soybean oil price expectations.

“Edible oils are increasingly functioning as energy-linked strategic inputs rather than pure food commodities,” Desai said. “This raises the price floor and strengthens correlation with crude oil and policy cycles.”

As a result, price behaviour is becoming less seasonal and more policy-sensitive, marking a departure from traditional supply-demand cycles.

India’s Structural Import Dependence

India remains structurally dependent on imports. Domestic edible oil production is estimated at 9.6 million tonnes in the 2025–26 oil year (October–September), meeting only about 40 per cent of national demand.

Imports are expected to total around 16.7 million tonnes, comprising:

8–8.5 million tonnes of palm oil

5–5.5 million tonnes of soybean oil

2.8–3 million tonnes of sunflower oil

Around 200,000 tonnes of other oils, including zero-duty imports routed through Nepal

“A $50–60 per tonne shift in spreads is sufficient to reallocate volumes at scale, highlighting the absence of stickiness at the bulk oil level,” Desai noted.

Palm oil imports have declined from over 10 million tonnes in 2021–22 to around 8 million tonnes currently, as sustained premiums and competition from soybean and sunflower oil alter India’s import mix. Refining margins, meanwhile, remain under pressure.

Trade Agreements Now Integral to Pricing

Desai said recently concluded free trade agreements and bilateral arrangements with partners including the U.S., EU, Australia, the UAE and SAFTA members are now central to pricing and sourcing decisions.

“These agreements directly influence landed cost structures, arbitrage flows and refining economics,” he said.

He added that further clarity on potential tariff concessions or quota mechanisms for U.S. soybean oil will shape forward trade flows. A recently announced quota of 500,000 tonnes of corn DDGS is expected to support India’s poultry and aquaculture sectors, though its impact on domestic soybean prices remains uncertain.

Price Outlook: Policy-Driven Ranges

Desai expects Bursa Malaysia Derivatives (BMD) prices to remain range-bound but highly policy-driven. April–June contracts are projected to trade in the 4,000–4,400 range, with July–September expected at 4,200–4,600, as palm and soybean oil compete for market share.

However, sustained premiums over soybean oil are likely to cap palm and sunflower oil consumption growth in India. Sunflower oil prices are expected to remain elevated until the next production cycle.

Call for Policy Stability

In a market increasingly driven by policy shocks rather than traditional agricultural cycles, Desai stressed the importance of stable and predictable duty and mandate frameworks.

“In today’s environment, policy stability is critical to prevent unintended price transmission to consumers,” he said, reiterating IVPA’s continued engagement with policymakers and global stakeholders to ensure balanced growth across the edible oil value chain.