Spain, the world’s largest olive oil producer, has seen its harvest improve by 77% in the 2024-2025 season. The Andalusia region alone is expected to yield about 1 million metric tons of olive oil. Coupled with strong outputs from Greece, Portugal, Tunisia, and Turkey, global production is projected to reach 3.4 million tons, up from 2.6 million tons in the previous year.

This turnaround has led to wholesale prices of top-quality Spanish extra virgin olive oil falling by about 55%, from a peak of $10,000 per ton in February to $4,250 per ton. Retail prices are expected to follow suit, with olive oil likely to drop from over €10 per liter to around €5 per liter.

For Southern Europeans, who rely heavily on olive oil in daily life, this price drop offers much-needed relief after two years of inflationary strain. In Spain, where the average annual consumption is 14 liters per person, households have spent over €450 on olive oil alone during the crisis.

Despite this reprieve, experts highlight two factors that could keep prices elevated:

1. Depleted Inventories: Global olive oil stocks hit a 57-year low in the 2023-2024 season, and it may take several years of strong harvests to replenish them.

2. Rising Demand: The popularity of the Mediterranean diet has driven worldwide olive oil consumption up by 100% over the last 30 years. Demand continues to surge in countries like the U.S., France, and the U.K., where consumption has grown 300% to 1,100% since the 1990s.

Although the immediate crisis has abated, the combination of limited supply and growing demand means olive oil prices are unlikely to fall significantly. For olive farmers, this shift could mean a sustainable livelihood after years of market volatility.

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On Friday, Malaysian palm oil futures experienced their steepest weekly fall in 18 months, driven by declining demand and weaker competing soybean oil prices. The benchmark palm oil contract for February delivery on the Bursa Malaysia Derivatives Exchange closed at 4,640 ringgit ($1,039.19) per metric tonne, down by 132 ringgit or 2.77%.

The palm oil contract registered an 8.81% weekly decline, its largest since April 2023, marking two consecutive weeks of losses. Similarly, soybean oil prices also fell, with a 1.52% drop last week. On the Chicago Board of Trade, soybean oil prices decreased by 0.71%, while the palm oil contract fell by 1.3%.

In September, palm oil exports totaled 1.86 million tonnes, but shipments to major buyers like India and China dropped by more than a third.

Thakkar advised oil traders to exercise caution due to the ongoing price decline. He emphasized that the current price levels are more likely to decrease further than rebound, making careful trading essential to mitigate potential losses.

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The SEA highlighted that the continued ban, extended by SEBI until December 2024, has disrupted essential risk mitigation tools for the industry. Futures trading, the association argued, is vital for managing price risks, stabilizing agricultural markets, and providing reliable price signals to stakeholders, including the government.

“The absence of futures trading deprives businesses of hedging mechanisms and leaves the government without crucial price signals, creating an information gap,” the letter stated.

The association also emphasized the impact on farmers, noting that soybean prices have fallen below the Minimum Support Price (MSP) of ₹4,892 per quintal, while rapeseed prices hover marginally above the MSP of ₹5,950 per quintal. Resuming futures trading in soybean, rapeseed, and their derivatives could enhance price stability and offer better support to farmers.

The SEA pointed out that studies consistently show futures trading does not significantly contribute to inflation. With crude palm oil and crude soybean oil being globally traded commodities, the association stressed the importance of reopening futures trading to restore market confidence and operational stability.

“The suspension, which began in December 2021, was expected to be a temporary measure. However, its continuation has weakened the industry’s ability to manage risks effectively,” the SEA said.

The edible oil industry is now looking to the government to address these concerns and reinstate futures trading, enabling smoother operations, better price discovery, and stronger support for India’s agricultural economy.

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SEA’s data showed a mixed trend within the oil categories. While crude palm oil imports decreased to 69.70 lakh tons (from 75.88 lakh tons last year) and RBD palmolein dropped to 19.31 lakh tons (from 21.07 lakh tons), sunflower oil imports saw a notable increase to 35.06 lakh tons, up from 30.01 lakh tons. Soybean oil imports saw a marginal decline to 34.41 lakh metric tons.

The decline in edible oil imports has also impacted total import expenditure, with the value decreasing slightly to Rs 1,31,967 crore from Rs 1,38,424 crore last year. “International price firming contributed to the domestic price rise, which led to a slight reduction in import demand,” SEA stated.

India, the world’s largest importer of edible oils, continues to rely on Indonesia and Malaysia as its primary suppliers of palm oil. As of November 1, the nation’s edible oil stock is estimated at 24.08 lakh metric tons at various ports.

Over the past five years, the share of refined oil imports has grown from 3% to 12%, while crude oil imports have declined from 97% to 88%.

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Key updates from the USDA report include:

• United States: Expected soybean production is set at a record 124.9 million tonnes, up from 113.4 million tonnes last year.
• Brazil: Forecasted to produce 169 million tonnes, an increase from 153 million tonnes in the previous year.
• Argentina: Estimated production has also risen to 51 million tonnes, compared to 49 million tonnes last year.

The global production estimate now stands at 428.7 million tonnes, up from 395.2 million tonnes last year, indicating a significant rise in supply.

In India, soybean production is projected to be between 12.5 and 13 million tonnes, with ample carryover stock. Thakkar suggested that if the government maintains current import duties, consumers could benefit from affordable soybean oil prices due to the global abundance.

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“While other FMCG companies see softer urban demand, we continue to perform well as we cater to essentials that every household needs,” said Angshu Mallick, CEO & MD of Adani Wilmar. The company reports no indication of consumers’ downtrading within its product categories and anticipates continued demand growth from urban India.

Adani Wilmar’s revenue from modern trade and e-commerce channels posted strong double-digit growth year-over-year in Q2, with the e-commerce segment alone increasing fourfold over four years, surpassing Rs 3,000 crore over the last 12 months. Mallick noted that bulk orders for 5-litre oils and 5-kg atta are popular on quick-commerce platforms, particularly in urban areas.

Additionally, a rise in edible oil prices since October is not expected to hinder Q3 growth. “The wedding season, Diwali festivities, and strong rural demand due to a favourable kharif harvest will boost sales,” Mallick explained.

Expanding its product line, Adani Wilmar plans to enter the spice market within this fiscal year by either establishing an in-house plant or contracting production. The company recently returned to profitability with a consolidated profit of Rs 311.02 crore in Q2 FY25, reversing a Rs 130.73 crore loss in the same period last year. Q2 revenue reached Rs 14,460 crore, an 18% increase year-over-year, with edible oils, food, and FMCG segments contributing significant double-digit growth.

Expanding its rural distribution network, Adani Wilmar now directly reaches over 36,000 towns, aiming for 50,000 by FY25. This expansion is poised to strengthen its position across rural and urban markets, positioning the company for continued growth.

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Prices of everyday essentials such as biscuits, snacks, and personal care products could jump by 6-7% next quarter, after the government raised basic customs duty (BCD) on crude and refined edible oils by 20%. Industry players expect the cost of refined palm oil, which accounts for 12-20% of raw material costs for these products, to increase sharply.

With existing inventory covering only 1-2 months, companies will likely pass on the rising input costs to consumers, marking the end of a nine-month pause on price hikes. “Apart from palm oil, wheat prices are also rising. We expect to implement a 7% price hike by next month to balance growth, which has been largely volume-driven recently,” said Krishnarao Buddha, Senior Category Head at Parle Products.

India imports 95% of its edible oil, making the price hike a critical issue for fast-moving consumer goods (FMCG) companies. Palm oil derivatives are key ingredients in home and personal care products like soaps and detergents, as well as food items such as biscuits and snacks.

Other raw materials are also seeing inflation, with Dabur’s CEO Mohit Malhotra warning of further price hikes as food inflation impacts everything from tea to fruits and vegetables. “We anticipate some inflation in the second half of the year, and we might need to raise prices in the food business,” he said.

The consumer goods industry, already facing price-sensitive demand, may see further pressure. After raising prices by almost 25% following the pandemic, companies had started lowering them last year due to consumer shifts toward cheaper alternatives. However, Britannia’s Executive Vice Chairman, Varun Berry, recently indicated that price hikes might return soon if inflation persists.

Larger players are expected to benefit from the current environment, potentially gaining market share as smaller, unorganized companies struggle with financial constraints. A report by Nuvama Institutional Equities suggests that big companies may emerge stronger, leveraging their financial stability to weather the storm of rising costs.

The price increases are anticipated to take effect in the next quarter, potentially altering the competitive landscape of the FMCG sector.

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The rise in olive oil prices has been staggering, largely driven by severe droughts and heat waves in key producing regions. Javier Blas, Bloomberg’s olive oil expert, attributes this to the ongoing climate crisis. The price surge has also given rise to fraudulent activities, with criminals taking advantage of the situation by selling low-grade or adulterated oils as premium extra virgin varieties.

A report from the European Union, obtained under the Freedom of Information Act, reveals a record number of olive oil fraud cases in early 2024. However, experts believe the actual extent of the crime is much higher, as many cases go unreported. Fraud can involve mixing high-quality olive oil with cheaper adulterants or passing off low-grade oils as extra virgin by adding substances like chlorophyll. In July, Italian authorities seized 42 tons of fake olive oil worth nearly $1 million, along with 623 liters of chlorophyll and 71 tons of an unnamed “oily substance.”

Olive theft is also on the rise. Spanish police recently foiled an attempt to steal over 465 kilograms of olives, highlighting the lengths to which criminals are going to profit from soaring olive oil prices. With olive oil now being referred to as “liquid gold,” the surge in fraud comes as no surprise.

While cases of olive oil fraud have been recorded for millennia—dating back to 2,400 BC in ancient Syria—extreme weather events have heightened the risks. The UK’s National Food Crime Unit has cited climate change as a key factor driving food crime, and a recent report from the UK Food Standards Agency (FSA) emphasizes the increasing likelihood of fraud in high-value commodities like olive oil, coffee, chocolate, and orange juice.

Though olive oil fraud is more prevalent in some regions, the possibility of counterfeit products entering global markets is growing. According to the FSA, 97% of food tested in the UK in 2024 was found to be authentic, but the evolving risks posed by climate change, supply chain disruptions, and economic pressures mean that consumers should remain vigilant.

With extreme weather events becoming more frequent, the threat to global food security—and the risk of food fraud—will only continue to rise. As the cost of premium olive oil and other commodities like orange juice and coffee soars, the opportunity for criminals to profit from counterfeit products will likely expand. Consumers are advised to be cautious and seek trusted sources to ensure the authenticity of their purchases.

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The move is expected to impact palm oil prices globally, particularly in Malaysia, while potentially increasing demand for alternative oils like soy oil. India, the world’s largest importer of palm oil, typically imports around 750,000 tons per month, making this cancellation about 13.3% of its monthly intake.

Earlier this month, India raised the basic import duty on crude and refined edible oils by 20 percentage points, increasing the total duty on crude palm oil to 27.5%, up from 5.5%. The sudden hike, coupled with rising Malaysian prices, caught refiners off guard. “Refiners can now make more profit by cancelling old contracts and selling at higher prices,” said one east coast-based refiner who cancelled shipments for October delivery.

Aashish Acharya, Vice President at Patanjali Foods Ltd., noted that refiners on India’s east coast have been cancelling contracts to take advantage of higher profit margins. Crude palm oil is currently being offered at around $1,080 per ton for October delivery in India, a significant increase from $980-$1,000 just a month ago.

Sandeep Bajoria, CEO of Sunvin Group, said refiners are uncertain about demand for the December quarter due to high prices and are unsure whether these price levels will hold, prompting them to cancel contracts.

Palm oil, traditionally favoured by price-sensitive buyers in Asia, is now trading at a premium over soy oil. As prices rise, Indian refiners are expected to shift towards cheaper alternatives like soy oil and sunflower oil, particularly as demand for palm oil typically dips during the winter months when the tropical oil solidifies.

India imports most of its palm oil from Indonesia, Malaysia, and Thailand, while sourcing soybean and sunflower oils from Argentina, Brazil, Russia, and Ukraine.

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On September 14, 2024, the government raised customs duties on crude soyabean, palm, and sunflower oils from zero to 20% and on refined oils from 12.5% to 32.5%. However, during a meeting on September 17 with industry bodies, including the Solvent Extraction Association of India (SEA) and the Indian Vegetable Oil Producers’ Association (IVPA), the government urged companies to maintain stable prices, given that existing stocks were imported at lower duties.

“The industry has been asked to provide reasons for the price increase despite sufficient stock availability at lower import costs,” a senior official from the Ministry of Food said on Friday. The government emphasized that the imported stocks, which could sustain domestic consumption for 45–50 days, should prevent any immediate price hikes.

The government also highlighted the significant volume of edible oils—about 30 lakh tonnes—imported at previous lower duties. With the festival season approaching, increased consumer demand could further inflate prices if industry players fail to act responsibly.

India remains heavily reliant on imports for edible oils, meeting over 50% of its domestic needs through imports, primarily from Malaysia, Indonesia, Brazil, Argentina, and Russia. The recent increase in import duties is part of the government’s strategy to boost prices for domestic oilseed farmers ahead of the new soybean and groundnut harvests expected in October.

Officials continue to monitor the situation, reiterating that industry players must ensure price stability during this critical period.

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