Falling palm oil prices

Palm oil prices have been on a downtrend lately, which is good news for Pakistan — a leading importer of palm oil, where it is used in cooking oil and ghee.
As of February 2015, palm oil imports accounted for over 41 percent of all food imports and 5 percent of all imports, according to central bank data. Over the past year, palm oil prices have fallen by some 20 percent, largely due to the global decline in crude prices that make it less attractive as a bio-fuel. This has benefited Pakistan; for the eight months ending February FY15, palm oil imports were at a low of $1.2 billion – a 9 percent decline over the comparable period last year, according to central bank data.
Industry source add that domestic demand has not weak, which implies that the decline in the number is due to fall in value rather than volume. Data released by Pakistan Bureau of Statistics confirms the same view. According to PBS, which is customs data as against balance-of-payment data released by the central bank, palm oil imports were down 2.2 percent in dollar terms in 8MFY15, despite a 4 percent year-on-year increase in volumes in the same period.
A recently released USDA report on palm oil mentions that the more well-off consumers are shifting from hydrogenated oils to soft oils for health reasons. It expects Pakistan’s total oil consumption for next year at a record 3.8 million metric tons – a 3.5 percent increase over the current year.
Recently, Pakistan signed a Preferential Trade Agreement with Indonesia, the world’s largest producer of edible oil, giving a 15 percent margin of preference. Resultantly, palm oil imports from Indonesia have increased by 80 percent year-on-year to $375 million for the seven months ended January, while the same from Malaysia declined by 48 percent to $272 million.
With low oil prices likely going nowhere and lackluster global demand, palm oil prices seem to be capped and Pakistan can continue capitalizing on it.