June 15, 2020
Like other food products that met with a collapse in demand, edible oil also experienced in a significant demand loss following the nationwide lockdown. The abrupt brakes applied to the country as a lockdown option, it stands into a state of ‘forced dormancy’. The effects on businesses meant massive job losses and income upheavals with reverse mobility of over a 100 million migrant workers to their origins.
The supply chain was disrupted with the closure of processing units such as oilseed crushing, solvent extraction and refining activities aggravating with non-availability of labour and transport for movement of goods. On their part, retailers jacked up prices in the wake of supply tightness and panic buying by consumers.
The Challenges of Demand and Supply
Since the announcement of lockdown, retail prices of almost all import-driven food products as well as domestic movement of products between the state boundaries, increased by 10-20 per cent due to the supply disruption. To simply state it, the country faced dual strike of demand side and supply side challenges.
Though the supply side is very slowly limping back, optimism on the demand side is not so appealing and robust. Commercial and institutional consumption, in comparison to household consumption, of edible oil has taken a major setback as the worst affected in terms of major usage was the HoReCa segment comprising of hotels, restaurants and catering, eateries and street food that accounts for a bulk of out-of-home consumption.
Usually during summers, all cooking oil consumption shows a low graph though Ramazan festival in April-May indicated a little pop to the demand curve.
As coming months are pointing towards the traditional celebrations of series of festivals from August till November, the consumption demand for oil looks bleak. With lesser income and in many cases no job at all, the uncertain prospects of revival of business activities, demand for cooking oil is unlikely to be robust during the festive season.
Revival prospects for edible oil can happen not before the last quarter of 2020. In fact, restrictions laid on the HoReCa segment are unlikely to be lifted in a hurry. Even if they are lifted, to gain the trust back of the consumers will be extra-laborious.