SEA cautions on longer-term impact of geopolitical volatility in edible oil sector
Solvent Extractors’ Association of India warns geopolitical tensions around the Strait of Hormuz may disrupt edible oil supply chains in India. Rising freight, packaging costs, biodiesel-driven palm oil tightness, and a below-normal monsoon could push prices higher and increase import dependence.
The Solvent Extractors’ Association of India (SEA) has said that continued geopolitical volatility may have longer-term implications for the edible oil sector in the country.
In his monthly letter to the members of the association, Sanjeev Asthana, President of SEA, said the recent developments surrounding the US and Iran have created a fluid and uncertain environment in the Gulf region.
While the temporary ceasefire and brief reopening of the Strait of Hormuz offered some initial relief, the situation has since turned ambiguous, with intermittent disruptions and conflicting signals.
“For our industry, this continues to pose challenges, as shipping routes remain vulnerable, freight costs elevated, and trade flows of edible oils and oil meals uncertain, making planning more complex,” he said.
Since the onset of the conflict, prices of crude-linked derivatives such as polyethylene and polypropylene — key inputs in plastic packaging — have risen by 50-60 per cent, placing bottles and plastic wrappers among the weaker links in FMCG supply chains. Packaging typically accounts for 15-25 per cent of product costs, meaning even moderate increases can significantly impact prices of edible oils, he said.
“In this context, continued geopolitical volatility may have longer-term implications for the sector, though we remain hopeful that sustained diplomatic efforts will lead to a more durable resolution and smoother global trade conditions in the months ahead,” Asthana said.
Monsoon
The early projections from the Indian Meteorological Department suggest that the 2026 Southwest monsoon, pegged at 92 per cent of the Long Period Average (LPA), is likely to remain in the ‘below-normal’ category; deviating from a normal monsoon between 96 per cent and 104 per cent of the LPA.
Stating that the overall outlook signals a weaker monsoon and rising risk, he said the Southwest monsoon remains critical for India’s economic growth, as a good kharif harvest supports a strong rural economy. However, a potential decline in kharif production may lead to food inflation.
This comes amid rising input and fuel costs due to the ongoing US-Iran conflict, adding further pressure on the agriculture sector and becoming a cause for concern for all.
Oilmeals
He said the recent geopolitical developments in the Gulf region have disrupted exports of oilmeals to West Asia and Europe due to higher freight costs and shipping challenges. To mitigate this, there is a need to strengthen efforts in existing and alternative markets.
In this regard, SEA plans to organise a trade delegation of 10-12 leading exporters to key Far East markets during July 2026 to make up for shortfalls and enhance trade opportunities.
India exports nearly 65 per cent of oilmeals to Far East. West Asia and Europe account for around 20 per cent and 15 per cent of exports, respectively.
Palm oil
In another communication, BV Mehta, Executive Director of SEA, said the interplay of biodiesel expansion, weather risks, and geopolitics is setting the stage for a more constrained global palm oil balance going into 2026-27. Geopolitical disruptions around the Strait of Hormuz and evolving trade policies are adding layers of uncertainty to global supply chains.
“With Indonesia’s shift toward B50, Malaysia’s to B15 and Thailand’s to B20, it’s quite evident how global palm oil trade is getting tighter in near future! With India’s close partners ramping up their biodiesel mandates and diverting more palm oil toward domestic energy use, it’s bound to result in compressing exportable supplies from the region,” he said.
For India, this comes at a time when import dependence remains high and price sensitivity is elevated. The recent dip in palm oil imports reflects short-term demand adjustment due to high landed prices, but it does not alter the underlying structural reliance on imports. Besides, the India Meteorological Department flagging a below-normal monsoon and the likelihood of El Niño conditions, the risk of higher import demand in the second half of the year remains significant if domestic oilseed output is impacted, the communication said.
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Source : The Hindu Business line
