Palm oil prices drop sharply worldwide, govt delay forces local consumers to pay more

Palm oil prices have dropped to record lows in the international market, driving down wholesale rates in Bangladesh, but consumers are yet to benefit. Over the last month, wholesale palm oil prices have fallen by more than Tk450 per maund, yet retail prices remain virtually unchanged. 

Market insiders blame the government's long delay in revising official prices, leaving retailers obligated to follow outdated rates. On 12 August, the government reduced the retail price of loose palm oil from Tk169 to Tk150 per litre. At that time, the global booking price of crude palm oil (CPO) hovered between $1,026 and $1,045 per tonne, relatively stable by international standards.

However, by November, the booking price had plummeted to $950–980 per tonne. Compared to the average booking price in October, the rate on 28 November was $75 lower. In several sharp drops between 8 October and 12 November, prices even fell below $953 per tonne, one of the lowest points in recent years.

This widening gap between the international market price and the rate in effect when the government last set retail prices explains why the decline in wholesale prices has not trickled down to consumers.

A month ago, palm oil wholesaled at Tk6,100 per maund. In November, it slid to Tk5,770, the lowest in recent times. Still, the official retail price remains stuck at Tk150 per litre.

According to Trading Corporation of Bangladesh data, palm oil is currently selling at Tk152–162 in retail markets. Despite official directives, retail prices have deviated for months because no new price adjustments have been announced since August.

Industry insiders say the government's monthly price review mechanism has effectively collapsed. With more than three and a half months passing without a fresh adjustment, retailers continue to follow a price set when global rates were significantly higher.

Seasonal factors are also at play. As winter begins, palm oil tends to solidify, slowing wholesale supply order (SO) transactions. Demand typically weakens in colder countries such as China, further pushing global prices downward. These seasonal dynamics have contributed to the domestic wholesale decline.

The latest data from the Malaysian Palm Oil Board (MPOB) shows CPO production rose 11.02% in October to 2.043 million tonnes. At the same time, CPO stockpiles increased by 16.55% to 1.473 million tonnes. The combined rise in production and inventory has intensified supply pressure globally, dragging booking prices down from 4,500 ringgit recently to 4,000 ringgit.

Wholesalers in Khatunganj, the country's largest edible oil trading hub, say domestic demand for palm oil typically drops during this period, pushing prices lower. However, because the government-set retail price remains high, the fall in wholesale rates is not reflected in consumer markets.

They also note that despite lower wholesale SO prices, cash-based palm oil purchases have not become cheaper. Winter-related solidification has further slowed wholesale transactions.

Md Nazim Uddin, a palm oil SO trader in Khatunganj, said, "Soybean oil booking prices have remained steady for months, but palm oil has dropped significantly. Several days ago, booking prices touched their lowest in years. Though prices have risen slightly since then, importing at current rates would still allow retailers to sell at competitive prices. The government should revise prices now and ensure sufficient imports and supply ahead of Ramadan."

Bangladesh Wholesale Edible Oil Traders Association President Md Golam Mawla told The Business Standard, "The price-setting mechanism for edible oil has become practically defunct. The Commerce Ministry was supposed to review prices every month. When global prices drop, importers resist cuts; when prices rise, they push for increases, and the government delays its decision. As a result, no matter what price the government sets, importers adjust the rates of loose palm oil, super palm oil, and soybean oil based on their own import costs."

He added that failing to revise soybean oil prices during global dips causes some loss for traders, but prolonged delays in price adjustments and weak market regulation mean official price caps rarely benefit consumers.