Pakistan imported $417 million worth of palm oil in August 2022 – easily the highest ever. The imported unit cost at $1558/ton was 1 percent higher from June 2022, when palm oil spot prices averaged the highest. The palm oil market price in August 2022 was 40 percent lower than June. This is anomaly of biblical proportions.

Since July 2021 – palm oil prices have come full circle – sustaining the high for three months from March 2022 to April 2022. Latest spot prices are at a 14-month low, while the unit cost is only 5 percent lower than the peak. The sharp decline in international markets has not (yet) come to the rescue for Pakistan imports or retail prices.

There is a plausible explanation for retail prices proving hard to come down, as the rupee depreciation has only hastened in the last three months, coinciding with the slide in palm oil rally. A substantial rise in transportation cost adds to the persistently high store prices. There could be some inventories built at peaking rates, as was the case with petroleum products around the same time. That said, the monthly quantity trend does not suggest a massive change – apart from June 2022, when the government made an obvious attempt to discourage all imports.

In September 2022 so far, palm oil prices in the spot market have decreased another 12 percent in 12 trading sessions. The differential of the imported cost vs. spot market has increased substantially in the last three months. Whether there is a case of higher premium as Indonesia has increased control over exports, or just the rub of the green going against the traders in terms of ill-timing the imports, is anyone’s guess, but palm oil will continue to be the single largest contributor to food imports.

While the import bill is expected to come down in September 2022, as prices have come to a multiyear low, a proportionate reduction in retail prices can easily be ruled out.