Noting that around 90 percent of the global sunflower oil supply is sourced from Ukraine and Russia, the rising tensions between these two countries as Russia mounts a full-scale invasion and military attack on Ukraine is certainly bound to affect the supply of edible oils, particularly sunflower oil, across the globe, notes Angshu Mallick, CEO and MD - Adani Wilmer.
He sheds more light on the ongoing situation that has the world in its throes. Highlighting that India imports a significant chunk of its edible oil requirements from the two countries, and more so from Ukraine since it has a surplus, Mallick foresees a stable Indian supply chain for now. Notably, our import dependence on Argentina for sunflower oil is minimal.
However, if the conditions continue to worsen for another two weeks or so, there will be obvious, acute pressures on the chain, he noted.
Russia-Ukraine News Live Updates
Adani Wilmar has reportedly fortified its supplies and acted in good caution early on, thanks to early warnings and indications received from its partner company Belmar, which operates sunflower seed crushing processes in both Ukraine and Russia. "Our pipelines are comfortable and we hope to sail through", added Mallick.
Pointing out that convention dictates having an inventory of 15 days on a voyage time of 40 days, Adani Wilmer has now kept "higher stops" in view of the situation and is now covered for around "60 days", accounting for those voyages already en route and in the sea at present.
As to whether a condition arises where this 60-day duration is prolonged and whether a price increase is in the cards, Mallick said that the dynamic nature of prices is not entirely a function of supply.
Also Read: Why edible oil prices are set to surge again
"There is an acute weather crisis in South America. Even South American wheat production is also down by about 15 percent, falling by as much as 25 million tonnes. Indonesia has another set of farm issues. The government has asked for at least 20 percent of produce to be given at a subsidised rate, which is already 50 percent lower than today's market price.
"So Indonesian exporters are likely to cover that, which would amount to approximately $125-$150. So, the dynamic of these three regions, which are major suppliers of edible oil, will determine the overall scenario. Not just sunflower oil, but the combined collection of all edible oils constitutes more than 70 percent of our inputs", he added.