In a year of economic gloom and doom, Pakistan is all set to increase its edible oil imports by almost 10 percent during the now concluding FY23, building on gains from a crash in the global commodity prices. During 11MFY23, domestic solvent industry imported 3.6 million metric tons of crude edible oil or raw material equivalents (oilseeds), more than the volume imported in full fiscal year 2022-23. Pakistan’s total edible oil supply during FY23 is expected to clock in at 4.2 million metric tons, after accounting for 0.6 million metric tons extracted from locally produced oilseeds.

To be fair, over the past two years, gross supply of edible oil inventory in the country has witnessed some drop. Between FY18 – FY21, edible oil supply (imports + local production) rose to an average of 4.4 million metric tons, of which 90 percent was based on imported raw materials – imported in crude or seed form. For the uninitiated, Pakistan’s solvent extraction industry imports Palm Olein (crude oil), soybean oil (crude), soybean seeds, and canola seeds, for onwards extraction and blending. Of this 90 percent imported oils, Palm Olein imported from tropical straits of Indonesia and Malaysia on average contributed 70 percentage points for at least past 15 years, with the remainder 20 percentage points contributed by soybean and canola, with oilseed cargoes imported from North and South American continents.

In fact, the last two years of economic upheaval, especially the pressure on balance of payments (BoP) has resulted in a modest but substantial shift in the national edible oil supply profile. Consider that the share of edible oil extracted from locally produced oilseeds has increased by 5 percentage points – from just 9 percent of total market in FY21 to 14 percent for FY23. Of this, a significant jump has been witnessed in domestic mustard/rapeseed/canola production, with market share rising from a little under 3 percent just two years ago to 9 percent during FY23. Per the Economic Survey released earlier this month, Pakistan’s aggregate domestic production of rapeseed, mustard, canola is now closing in on 1 million metric tons per annum, growing 4.25 times from average output of just 0.2 million metric tons per annum over last two decades (average through FY01 to FY20).

However, the share of domestically produced edible oil is still too low compared to just 10 years ago. As late as FY14, the solvents industry extracted as much as 20 percent of total edible oil supply from locally produced oilseeds, of which three-fourths was contributed by cottonseed oil alone. In fact, cottonseeds contributed as much as 21 percent of total annual supply around the turn of the century, with an additional 9 percent contributed by other oilseeds such as mustard and sunflower. However, share of local oilseeds underwent a secular decline over the past two decades, with final blows received in last three years when domestic cottonseed output crashed to half of its peak levels recorded during mid-2000s.

Put together, the share of domestically produced and imported canola, rapeseed and mustard (in seed or crude form) now stands at 16 percent of annual national supply of vegetable-based oils, its highest share in at least 13 years. In fact, this is the first time since FY18 that the aggregate share of canola, rapeseed and mustard now exceeds that of soybean oil, which is a purely import based oil (whether imported in seed or crude form).

Sector watchers would note that the turn in canola’s fortune is not of its own doing. Until last year, soybean oil was only second to Palm Olein in its contribution to edible oil market – with total market share averaging at 12 percent. Of this, 80 percent of soybean edible oil sold domestically was extracted from oilseeds primarily imported for poultry and livestock meal preparation. However, the soybean ban fiasco during H1-FY23 has brought oilseeds import to a screeching halt, with solvent extractors switching to direct import of soybean oil in crude form (no surprise that the soybean oil imported in crude form also traces back its origins to GMO countries).

In fact, if soybean oilseed imports were not facing a regulatory ban, aggregate supply of vegetable based edible oils during FY23 may have shot past the 4.4 million metric tons mark, closing in on record import volumes from just two years ago. For much of the past year, the soybean oilseeds shock was partly mitigated by higher local canola/mustard production and direct import of soy crude, but market conditions could remain tight going forward due to non-resolution of the GMO question and fears of LC issuance by local banks facing problems.

But as far as Pakistani appetite for edible oils is concerned, there has been little respite, never mind that prices in the domestic retail market have doubled in just past 21 months. Is it the love of samosas, or a penchant for Afghan grey trade fueling the unabated demand for edible oil from Pakistan?