Terms of trade in the food sector have been Pakistan’s savings grace on the trade balance front this fiscal year. From rice and nuts holding the export front – palm oil has contributed the most in food category import savings during 8MFY24. We will never quite know what is contributing the most to the edible oil import slowdown, but Pakistan is not really waiting for those answers yet – as long as the dollar bill is manageable.

From the all-time high of over $400 million monthly imports in August 2022, palm oil imports averaging $242 million a month in FY24 is a big retreat. Also ironic that Pakistan recorded some of the highest import quantities at the time of record unit prices. The dip came only after the rupee was sent packing, taking the retail prices to all-time highs – even as the international palm oil prices started to recede.

For the last 12 months, the currency has largely been stable, and palm oil prices have shed 9 percent since July 2023. The import volume has dropped 9 percent year-on-year during 8MFY24 to 1.9 million tons, whereas imports in dollars have been down 32 percent in the same period. Import volume is 10 percent lower than the 10-year monthly moving average monthly of 0.25 million tons.

Of course, the domestic demand is expected to have taken a hit, as the purchasing power eroded like never before in the last 18-20 months. Some are also hinting at the much talked-about crackdown on smuggling of goods has yielded significant results. That may be quite a stretch at this point, as a demand drop of a mere 9 percent – that too from a significantly high base around all-time highs, does not really tell that. Remember that Afghanistan’s official palm oil imports remain negligible to-date. Had there been a sizeable impact from smuggling, the import volumes would have been much lower than 9 percent – which seems a fair number to cater for the loss of domestic demand alone.

The movement at retail level is unique in Pakistan’s historical perspective. Never before have palm oil retail prices seen such a long stretch of bear run. For the past 10 months straight, palm oil retail price has recorded a month-on-month decline – shedding nearly 20 percent. This is easily the steepest fall in palm oil prices since at least 2012. Surely, stable currency and stable transportation costs in the past few months must have helped, in addition to weak international prices.

With both Indonesia and Malaysia expecting to report higher production for 2024 than last year, owing to improved weather and relaxed government policies – there is no imminent upside threat to palm oil supply outlook. Demand is also expected to keep up with supply, as no major buyer has so far shown signs of significant deviation from seasonal buying. Now, if Pakistan can also find a way to improve better controls, imagine the overall benefit to the economy.