Iran’s vegetable oil market is chaos as the industry relies mostly on imports for the raw material to produce the key consumer item. The government has promised to meet demand for the staple food to the best of its ability.
Iran produced 215,000 tons of vegetable oil and fats in the month to March 20, indicating a 24% increase year-on-year, Yazdan Seif, managing director of the Government Trading Corporation of Iran, said.
“Production stood at 196,000 tons in the month ending Feb. 18 compared to 185,000 tons the year before. In the month ending Jan. 19 companies produced 177,000 tons compared to 154,000 tons in the same month of the year before,” he was quoted as saying by IRNA.
He concurred that Iran’s almost 93% dependence on imports of raw materials and oilseeds is the main challenge the crucial industry is grappling with.
“The first half of the last fiscal year [March 20-Sept. 21, 2020] was the toughest in the history of the sanctions against Iran. It coincided with the outbreak of Covid-19 and problems due to the lack of foreign currency. We managed to solve the problems by tapping into our strategic reserves.”
“An estimated 650,000 tons of vegetable oil is in the ports’ and in the inventories of producing companies -- four months consumption. Monthly consumption of edible oils and fats is 150,000 tons.”
The Government Trading Corporation provided vegetable oil factories 2.07 million tons of unprocessed oil including 1.97 million tons from strategic reserves, subsidized imports by private sector and facilitated imports and increase in domestically-produced oilseeds last year.
Vegetable oil factories were supplied 260,000 tons of raw vegetable oil since the start of the current Iranian year (March 21) to April 14, ILNA reported.
This is while the Ministry of Industries, Mining, and Trade's review of the first eleven months of the last Iranian year (March 20, 2020-Feb. 18, 2021) shows domestic production of vegetable oil logged the steepest decline (16.2%) from among 29 products to 1.38 million tons.
Smuggling from the eastern and western borders is often blamed for the increase in cooking oil prices, Qasemali Hassani, secretary of the Foodstuff Wholesalers’ Union said earlier.
“It is indeed regrettable that the government is in charge of production of vegetable oil from the beginning to end including allocation of foreign currency for raw material import to pricing and distribution. Private enterprise has no role in this matter,” he was quoted as saying by IRIB News.
Prices are set by the government and cooking oil with these price tags are distributed only at chain stores whereas less that 25% of the population has access to the chain stores, he complained.
He urged the government to end the contested mandatory pricing policy and instead pay the subsidy for cooking oil, which annually is 10 million rials (more than $40) per head directly to the people.
Given the rise in global prices of unprocessed edible oils and associated costs, consumer prices for goods packaged in PET containers will increase by 10% and those packaged in other types of containers by 13%, the Market Regulation Headquarters in Tehran has said.
Referring to the monthly consumption of 100,000 tons of unprocessed oils in Iran, Abbas Qobadi, an official with the Ministry of Industries said, “To calm the market turbulence, we’ve decided to increase both imports and production of solid fats and step up distribution.”
Dependence on imported raw materials, high costs of machinery and their maintenance and corruption stemming from allocation of subsidized foreign currency are three main challenges the vegetable oil industry is facing, Abulhassan Khalili, head of the vegetable oil industries’ association says.
“Imports meet 90% of demand for unprocessed oil and oil seeds. This makes it all the more crucial to expand oilseed production,” he said.
“Machinery manufacturers are mostly in Europe. Due to the [US] sanctions it has become increasingly difficult and costly to import equipment and parts.”
On the issue of subsidizing foreign currency to import raw vegetable oils he said, “The policy increases the risk of corruption in both the import and production process. The government obviously needs some alternative to support the low-income strata.”
