Iran’s Vegetable Oil Consumption Declines by 300,000 Tonnes

Iran’s vegetable oil industry has entered a new phase following changes in foreign exchange policies, reforms in raw material import procedures and rising production costs.

 

The removal of the preferential exchange rate was implemented with the aim of increasing transparency, reducing rent-seeking opportunities and improving consumption patterns; however, it also created new challenges for industry players, including working capital shortages, delays in settling foreign currency claims of manufacturers and the management of crude oil imports.

Despite these challenges, the vegetable oil market has reached relative stability in recent months, and producers’ efforts have helped maintain the production and supply of this strategic commodity at acceptable levels. However, one of the most significant consequences of the new currency policy has been a decline in vegetable oil consumption in the country.

According to estimates, annual vegetable oil consumption, which stood at around 2.1 million tonnes last year, is expected to remain below 1.8 million tonnes this year — representing a decrease of approximately 300,000 tonnes. This decline has been attributed to several factors, including reduced household consumption, lower demand from industries and food service businesses, decreased use of oil in exported food products and the elimination of smuggling activities.

One of the major challenges facing the industry is the suspension of foreign currency claim payments to vegetable oil manufacturers and the significant increase in working capital requirements. Limited access to foreign currency resources has placed additional pressure on domestic producers and affected their trade relations with international suppliers. Meanwhile, the working capital required by the vegetable oil industry has increased nearly fivefold compared with previous levels, without a corresponding increase in financial support and banking facilities.

Alongside financial challenges, producers are calling for reasonable adjustments to product prices in line with rising production costs. Exchange rate increases, higher prices of packaging materials, rising labour costs and changes in customs exchange rate calculations have all contributed to higher vegetable oil production costs, while product price adjustments have not taken place at the same pace.