Report Highlights:

Pakistan’s marketing year (MY) 2014/15 (October/September) vegetable oil imports are forecast to be a record 2.66 million metric tons (MMT), 6.5 percent higher than MY 2013/14. MY 2014/15 imports of soybean meal are projected at a record 800,000 tons, up 23 percent from this year’s estimates. Oilseed production in MY 2014/15 is forecast at 5.3 MMT, up eight percent from the MY 2013/14 estimates. Pakistan’s cottonseed production in MY 2013/14 is projected at 4.48 MMT, up twelve percent over the previous year’s production. Imports of oilseeds are forecast at one million tons, down seven percent from last year’s import level of 1.08 million metric tons.

Executive Summary:

Pakistan is a net importer of oilseeds and edible oils, as domestic production of edible oils is sufficient to meet about 23 percent of total demand. Pakistani oilseed production consists of cotton seed, sunflower seed, and rapeseed production.

MY 2014/15 oilseed production is forecast at 5.3 MMT, eight percent higher than the revised MY 2013/14 estimate of 4.9 MMT harvests, due to increased production of cotton seed which is the main source of domestically produced oil. Imports of oilseeds are forecast at one MMT, seven percent lower than MY 2013/14 due to an anticipated increase in local oilseed production. Total supply of oilseed available for crushing in MY 2014/15 is forecast at 5.7 MMT, 6 percent higher than MY 2013/14.

MY 2014/15 domestic meal production is forecast at 3.44 MMT, up 35 percent from current year’s level of 2.55 MMT. MY 2014/15 imports of soybean meal are forecast at 800,000 tons, eight percent higher than MY 2013/14 imports.

MY 2014/15 oil production is forecast at 1.32 MMT, three percent lower than the current year’s estimate of 1.36 MMT (why is oil production down if oilseed production is up?). Vegetable oil imports are forecast at a record 2.66 MMT, an increase of 6.5 percent relative to MY2013/14, due to record oil consumption.

OILSEED

Production:

Pakistan is chronically deficient in edible oil production, and, as a result imports account for 77 percent of its domestic requirements. Since the 1970’s, oilseed imports have been on the increase, a trend that will continue in tandem with its burgeoning population growth. Sporadic efforts have been made to increase local oilseed production, but, so far, have proven unsuccessful to narrow the vast gap between production and consumption.

MY 2014/15 (Oct-Sep) Oilseed production is forecast at 5.3 MMT, up eight percent over the MY 2013/14 revised production estimate due to an anticipated increase in cottonseed production. Cottonseed production during MY 2014/15 is forecast at 4.48 MMT, twelve percent higher than the MY2013/14 weather affected crop. Sunflower seed production is forecast at 540,000 tons, down 10 percent from last year and rapeseed production is forecast at 300,000 tons, six percent lower than the previous year’s estimate of 320,000 tons; both as a result in similar reductions in planting area. 

Post’s estimate of Pakistan’s total oilseed production in MY 2013/14 was revised down eight percent to 4.9 MMT, due to a decrease in cotton production, as last year’s unfavorable weather conditions coupled with less availability of quality seed resulted in a five percent decrease in cotton planting area. Early onset of monsoon rain, tight water supplies due to power shortages and heavy pest infestation of whitefly and jassids stressed the plants to the point where they were more susceptible to the incidence of cotton leaf curl virus (CLCV) in the cotton growing areas of Punjab and Sindh province that impacted the overall production of the cotton crop. 

Cottonseed:

Cottonseed is the principal oilseed crop grown in Pakistan, accounting for about 65 percent of domestic oilseed production. Cotton is the country’s most important cash crop and is considered the backbone of the national economy, as it provides the key input for Pakistan’s $30 billion textile industry. 

MY 2014/15 cottonseed production is forecast at 4.48 million tons, twelve percent higher than the MY 2013/14 crop. This increase in production is mainly attributed to increased cotton area, six percent higher than last year and the use of biotech cotton varieties to around 95 percent of the cropped area. This forecast is based on the use of best agricultural management practices by farmers, and the prevalence of favorable weather conditions.

Rapeseed:

Rapeseed-mustard is an important species of Brassica group grown as oilseed crops in Pakistan, and a major source of edible oil in the sub-continent for centuries. It is sometimes grown as a fodder in mixture with "berseem" (alfalfa/medics). The area under rapeseed-mustard fluctuates depending on the Government of Pakistan’s (GOP) price support policy for wheat crop, rapeseed prices during the last year and prevailing weather conditions, as moisture availability in marginal areas is key for farmers’ cropping decisions.

MY 2014/15 rapeseed production is forecast at 300,000 tons, a six percent reduction from MY 2013/14 rapeseed production estimate of 320,000 tons, due to a similar reduction in planted area. The Planting area is declining due to farmer’s shift to the wheat crop during last two years due to relatively better government wheat support price and less than average rainfall during early Rabi season

Sunflower seed:

In Pakistan, commercial cultivation of sunflower began in the 1960’s, and its production remains cyclical, due to its competition with major crops such as corn and sugarcane and marketing issues related to the size of crop and offered prices from the private sector.

MY 2014/15 sunflower seed production is forecast at 540,000 tons, ten percent down from the current year’s estimate of 600,000 tons due to increased area allocated to substitutes crops i.e. cotton, rice and vegetables with the anticipation of more attractive prices.

Consumption:

Oilseed consumption will continue to be strong in ensuing years due to Pakistan’s high population growth rate and steady growth in the poultry and livestock sectors. Since 2005, the Government of Pakistan (GOP) has implemented a liberalized import policy for oilseeds, in order to meet the country’s growing consumption needs. The oilseed crushing industry, the main beneficiary of these policies, has improved its efficiency by overhauling older machinery and installing high-tech solvent extraction equipment. 

Total oilseed crush in 2014/15 is anticipated at 5.7 MMT, 5.5 percent higher than in 2013/14, as higher local production and imports are needed to meet the growing oil and oil meal demand. Almost 85 to 95 percent of total oilseed production is crushed for oil with the balance used for food, feed, and seed purposes.

Trade: 

Total imports of oilseeds for crushing are forecast at over one million tons in MY 2014/15, down seven percent over last year’s revised estimate due to anticipated increase in local cotton production. Regular imports of oilseeds are required to meet the increased demand for edible oil from Pakistan’s burgeoning population, and oilseed meal from the increasingly intensive production systems of the livestock and poultry sectors.

The MY 2014/15 oilseed import forecast includes 707,000 tons of rapeseed/canola–mainly from Canada, Australia and the Ukraine followed by 300,000 tons of sunflower seed from different origins. Since June 2005, under a reformed import policy regime, the GOP exempts oilseeds from import duty, central excise duty, and federal excise duty. 

MY 2013/14 oilseed imports are estimated at 1.08 million tons, made up mostly of rapeseed/canola seed and sunflower sourced from Canada, Australia and Ukraine respectively. 

Policy:

In an attempt to ensure food security, Pakistan’s agriculture policy is largely focused on the enhancement of wheat production. Oilseed production receives less attention than cash-crops like wheat, rice, cotton and sugarcane, although, in 2013 alone, more than $2.6 billion was spent on imports of oil, oil meal, and oilseeds to meet Pakistan’s consumption needs. In an effort to curb expenditures on imports, and enhance oilseed production in the country, in 1995, the Pakistan Oilseed Development Board (PODB) was established. However, the PODB’s attempts of increasing production have been unsuccessful; additionally it has been unable to implement sustainable policies to develop a long-term approach to increase oilseed production.

With no support price mechanism, and the lack of proper funding to improve research, seed quality, and technology are key constraints that deter farmers to consider oilseeds in their cropping decisions. Additionally, the domestic crushing industry finds it more attractive to import quality oilseeds rather than providing incentives to local growers for increased domestic production, especially, since 2005, when the government facilitated imports by eliminating tariffs and duties on all oilseeds.

MEAL

Production:

MY 2014/15 oilseed meal production is forecast at 2.7 MMT, up five percent over MY 2013/14 due to the projected increase in local production of cottonseed supplemented with significant imports of oilseeds. Post’s estimate of MY2013/14 oil meal production was revised downward to 2.55 MMT, mainly due to reduced production of cottonseed. The domestic crushing industry traditionally produces an oilseed meal ration comprised of 63 percent cottonseed, 23 percent rapeseed/canola, and 14 percent sunflower seed. 

Consumption:

MY 2014/15 meal requirements are forecast to increase to 3.44 MMT due to the anticipated expansion of the poultry, dairy and livestock, and aquaculture sectors. Pakistan’s poultry meat production is expected to grow by more than 10 percent per annum. The layer industry is also expanding rapidly as it is able to provide a relatively cheap protein source compared to other sources of protein. According to Livestock Census 2006, Pakistan maintains a population of 74 million poultry birds, 80 million small ruminants and 57 million heads of large ruminants. The livestock sector accounts for approximately 55.1 percent to agriculture value addition and 11.5 percent to GDP during FY 2010/11. 

Dairy feed production is increasing at an accelerated pace to meet the demand of the expanding commercial dairy units that rely on high milk yielding animals and require higher quality feed. This has created business opportunities to several poultry feed manufacturers, which have started producing dairy feed and in turn spiking the demand for soybean meal to meet the rations’ needs of high protein content. This has resulted in a shift in demand of soybean meal by feed millers from the traditional 5-7 percent to 10-15 percent.

Trade: 

Pakistan’s meal imports are comprised of soybean meal, mainly imported from India. During MY 2013/14 Pakistan has imported 160,000 metric tons of Argentine soybean meal due to increased prices of Indian soybean meal by $ 100-150 above the international market prices. Pakistani feed millers acted swiftly and booked orders for four Panamax shipments of Argentine soybean meal. Imports in MY2014/15 are forecast at 800,000 tons, up 23 percent from MY 20113/14 estimate of 650,000 tons due to steadily growing livestock and poultry sectors. Prospects for imports of U.S. soybean meal, so far, are limited due to higher freight charges and time lag required relative to India, however, the lack of consistency in the quality of Indian soybean meal is a pressing problem for the feed industry.

OIL

Production:

Domestic oil production meets only about 23 percent of the demand with the balance met through imports. Due to a growing population and the inability to expand domestic production, Pakistan will rely on ever larger imports to meet its consumption needs. 

Based on an increased crush volume stemming from a larger cotton crop, supplemented with significant imports of canola and sunflower seed, domestic production of vegetable oil in MY 2014/15 is forecast at 1.3 MMT, equal to the production of current year’s revised estimate. 

Consumption:

MY 20134/15 total oil consumption is forecast at 3.9 MMT, up 5 percent over last year’s estimates. The share of imported oil in Pakistan’s total consumption is close to 77 percent, with palm oil accounting for 85 percent of total imports, given that home consumers and food processors prefer it due to its price competitiveness. Additionally, blending palm oil with local oils and selling it as cooking oil is popular in Pakistan. For health reasons, well-to-do consumers are gradually shifting from hydrogenated oils towards soft oils. 

Trade:

Pakistan is a leading importer of vegetable oil. In MY 2014/15, palm oil imports are forecast at a record 2.6 MMT, up 6 percent from last year’s estimate of 2.45 MMT. Refined palm oil accounts for about 98 percent of Pakistan’s total edible oil imports. 

Based on an anticipated oversupply of palm oil both in Malaysia and Indonesia, palm oil will remain competitive and remain the oil of choice over other vegetable oils, as price differential will be the significant factor in increasing palm oil consumption in MY 2014/15. The United States exports only limited quantities of soybean oil to Pakistan in the form of food aid