Production of oilseeds is on the rise thanks to a record cotton crop last year and increased output of sunflower in last two years on the back of enhanced support prices announced in 2010.

Provincial governments with full control over agriculture are making efforts to boost overall agricultural output but are yet to come up with specific strategies to enhance production of oilseeds.

Meanwhile, federally-run Pakistan Oilseed Development Board (PODB) is still playing a supervisory role in development of the oilseed industry.

Oilseed production is expected to increase eight per cent to 5.8 million tonnes in the current marketing year MY12 (October 2011-September 2012). But this would suffice to meet only 27 per cent of domestic demand. The gap of 73 per cent would be filled in two ways: up to 11 per cent of demand would be met by extracting edible oil from imported oilseeds and 61 per cent of demand through direct imports of edible oil—mainly palm oil.

Edible oil imports consume a large amount of foreign exchange every year. In FY12 Pakistan imported 2.109 million tonnes of palm oil for $2.375 billion which was equal to about 5.3 per cent of the country’s overall imports bill. Availability of enough oilseeds for extraction of edible oil is required to lower spending.

This has become all the more important in the light of the latest projections of oilseeds by the United States Agriculture Department. According to the report, the US—top producer of soyabean—would harvest a smaller crop in MY13 because of the extremely hot weather in parts of the country.

And drought in Brazil and Argentina—two other major producers of this oilseed crop—would result in reduced production there as well.

As a result global stocks of soybean would fall at least five per cent in the next marketing year beginning October. Prices of soybean have already been moving up during this year as exporters had started factoring in such developments long before the release of the USDA report on August 9. Sunflower production is also projected to decline because of lower output in Russia and hence a likely increase in sunflower oilseeds is looming on the horizon.

Pakistan imports soybean for blending in palm oil for manufacturing of cooking oil and ghee. Higher production of domestic oilseeds cannot compensate the rising imports value of soybean which is not produced locally but increased supply of domestic oilseeds could keep a balance in the overall mix of supplies of local and imported oilseeds.

The output of domestic oilseeds has increased over the years. But population growth and growing demand for oily foods in urban areas and roaring business of fast food industries have belittled this achievement. So, the deficit between local production of oilseeds and the actual requirement to meet overall demand is still large.

A very tiny part of the deficit is being tackled through imports of oilseeds into the country for extraction of edible oil. In the last three years oil extraction industry has expanded but capacity utilisation of the industry is lower than targeted.

“Things are improving now,” says an official of a large food processing and food export company which runs multiple edible oil refineries in Karachi and Multan.

“One of the reasons for slower capacity utilisation was that our domestic oilseeds output was not rising fast and imported oilseeds were becoming pricy. But during this (marketing) year solvent extraction plants are receiving fatter supply of oilseeds from growers. That boosts their confidence and they are using more of local oilseeds in edible oil production. If growth in oilseeds output is sustained for a few years imports of oilseeds would decline and imports of palm oil would also fall a little.”

In the last marketing year, Pakistan’s output of edible oil was enough to meet 34 per cent of the total demand. Industry sources say during the current marketing year which would end in September 2012, the share of domestically produced edible oil would be even higher.

They say that whereas food industry consumes the bulk of edible oil produced in the country at least 10 per cent of the output is used also in cosmetics, soaps and paints manufacturing and other allied industry. Whereas prospects for production are better, producers say some additional demand may come in from these industries as well.

Expansion in edible oil extraction business in the recent past to meet growing demand for cooking oil and ghee in the country has pushed up import of palm oil (14 per cent in FY11 and eight per cent in FY12). Soybean oil is also being imported in larger quantities. Imports of palm oil and soybean oil can be saved if provincial governments and growers join hands in acquisition of technology for cutting post-harvest losses of oilseeds.

Currently a big chunk of all the four oilseeds namely cotton seeds, sunflower, rapeseed or mustard and canola go to waste simply because of centuries old system in operation for picking and storing them.

Another issue is the absence of a proper marketing mechanism of these oilseeds. Currently, growers sell oilseeds to middlemen at throwaway prices and they supply the same to solvent extraction plants or edible oil refineries at exorbitant rates. About a dozen edible oil refineries are in operation in addition to hundreds of small and medium sized solvent extraction plants spread across the country.

Whereas edible oil refineries import crude palm oil (CPO) and process the same after blending any soft oil like soybean for manufacturing cooking oil and ghee, solvent extraction plants extract edible oil from domestic and imported oilseeds and sell some types of the extracted oil to cooking oil and ghee manufacturers (like sunflower oil and canola oil for further processing and branding of these oil).

Many big cooking oil and ghee manufacturers also run their own solvent extraction plants. Edible oil extracted from cottonseeds, rapeseed or mustard are sold commercially and the buyers include trading firms that market cottonseed oil to industries and rapeseed or mustard oil to wholesale markets for onward selling to consumers or retailers. —Mohiuddin Aazim