Soybean oil imports, both in crude and seed forms, declined marginally in Bangladesh in the current fiscal year as businesses are cautious in buying the raw materials at higher volumes despite surging prices of edible oil locally amid concerns that higher prices would drive down consumption.

But an increase in supply could be one of the crucial tools to cool off the volatile cooking oil market. 

Refined palm oil imports soared, according to Bangladesh Bank data compiled by the commerce ministry, reflecting that overall stocks were adequate to meet Ramadan's requirements when monthly demand increases to nearly 3 lakh tonnes from around 2 lakh tonnes.

Between July 1 and February 15 of FY2021-22, the amount of crude soybean oil for which letters of credit (LCs) were opened grew 7 per cent year-on-year to 4.89 lakh tonnes.

But the arrival of crude soybean oil, as reflected in the LC settlements, declined marginally to 3.73 lakh tonnes from 3.75 lakh tonnes a year ago, BB data showed.

With the recovery rate of edible soybean oil from its crude form being 95.25 per cent, data shows that refiners were able to finally avail 3.55 lakh tonnes through processing.

Interest in importing soybean seeds by crushing mills also waned during the period as the opening and settlement of the LCs declined.

Businesses opened LCs to import 6.05 lakh tonnes of seeds, a year-on-year drop of 14 per cent. Settlement of the LCs, or arrival of seeds, decreased 3 per cent to 6.05 lakh tonnes.

Some 17 per cent of edible soybean oil is extracted from soybean seeds.

"As prices are on the upward in the international market, we are importing soybean as much as is needed," said Biswajit Saha, head of corporate and regulatory affairs of City Group, one of the largest seed crushers and edible oil importers.

Soybean prices have been soaring for the last couple of months, influenced by concerns of reduced supply for dry weather in Brazil and Argentina, two major producers and exporters of soybean.

In its February report on "Oilseeds: World Markets and Trade", the US Department of Agriculture (USDA) said dry weather in South America over the past two months has significantly depressed their forecasts of soybean yields and slashed production.

Soybean prices have jumped in response to the decrease and forecast of tight stocks, it added.

The World Bank, in its Commodities Price Data for March, said the average price of soybean was $662 per tonne in February, up from $606 a month ago. Soybean oil prices were also skyrocketing.

While palm oil prices shot up for supply constraints, labour shortages, export restrictions by Indonesia, and the invasion of Ukraine by Russia, as Reuters recently said, buyers rushed to secure replacements for sunflower oil shipments from the top exporting Black Sea region.

Palm oil was priced at $1,522 per tonne in January from $1,345 the previous month, according to WB data.

Bangladesh Bank data showed that LCs were opened to import 29 per cent less crude palm oil year-on-year to 2.01 lakh tonnes until February 15 of the fiscal year. The arrival of crude palm oil fell 16 per cent to 1.56 lakh tonnes.

The recovery rate of palm oil from its crude form is 99 per cent.

But the overall trend of the import of refined palm oil remained positive, according to the LC opening and settlement data.

The LCs were opened to import 45 per cent more refined palm oil at 6.94 lakh tonnes between July 1 and February 15. The arrival grew 37 per cent to 5.32 lakh tonnes.

Didar-Mohd Dabirul Islam, head of finance and accounts of Bangladesh Edible Oil, said importers had been delaying opening LCs over the past month on concerns that they might suffer losses in case of a sudden slump in global market prices.

He said processors would feel confident in buying edible oil at higher prices from the global market if the government allows them to adjust the prices accordingly.

"We will also take prompt steps for import if the government removes value-added tax on edible oil imports," he said.

Md Shafiul Ather Taslim, director of TK Group's finance and operations, said they were continuing to make imports but not at a high volume.

"It appears that imports would decline to some extent as consumption is likely to drop for high prices," he said.