October 2022: Another big drop in the cost of palaw.
Sunflower oil prices seeing the drop of 15% on an annual basis.
The average cost of cooking palaw in Ashgabat was 84.5 Turkmen manat in October 2022, which is 0.5% lower month-on-month (MoM) compared to the prices observed last month (84.9 manat) and 15.9% cheaper year-on-year (YoY) compared to the prices in the corresponding month of the last year in October 2021 (100.4 manat). This is the fifth month (June-Oсtober 2022) in a row that palaw prices decline based on YoY after dropping by: 13.4% in June, 9.1% in July, 28.8% in August and 27.1% in September 2022.
Similar to the trends of the last four months, prices of all palaw ingredients except for rice have fallen in October 2022 on a YoY basis. Prices of onions dropped (-48%), carrots (-28%), beef (-28%), sunflower oil (-15%), and wheat flour fell (-7%) YoY in October 2022 compared to October in 2021. The price of rice, on the other hand, has risen by 28% over the same period of time (see Figure 1).
In October 2022, onion prices saw the biggest decline of -48% YoY. The prices sunflower oil dropped by 15% YoY. Figure 2 shows the monthly price changes of sunflower oil between January 2020 and October 2022.
State Committee on Statistics of Turkmenistan does not publicly share the annual output of sunflower oil production in the country on its website. FAO’s forecasted annual sunflower oil production for the country is not available either. Business Turkmenistan media outlet points out that vegetable oil remains one of the main imported products of the country along with sugar and margarine.
Turkmenistan largely imports sunflower oil from abroad, mainly from Russia, which accounts for 88.4% of all imported sunflower oil in 2020. Data for 2021 and 2022 are not yet available. Turkmenistan imported 15,500 tonnes of sunflower oil from Russia in 2021 with a cost of 23.7 million USD, which was 41.5% higher than the previous year’s amount. The major Russian oil brands sold in Turkmenistan include: “Слобода” and “Благо” which ownes “Золотой Кувшин”, “Каролина” and others.
Impacts of government policies
Government policies can have little effect on the prices of sunflower oil sold in Turkmenistan as they are mostly imported from abroad. We identify the following policies through which the authorities can either directly or indirectly impact the prices of sunflower oil such as: the black-market exchange rate; import restrictions in the form of tariffs and duties; and obstacles in opening cooking/vegetable oil producing factories to increase the domestic supply.
The black-market exchange rate
Since sunflower oil is mainly imported from abroad with foreign currencies (usually in USD), changes in the value of the currency exchange rate will have a direct impact on oil prices sold in Turkmenistan. On a YoY basis, the average black-market exchange rate fell by 14.8% from 22.9 manat in October 2021 to 19.5 manat in October 2022. When it comes to the average annual black-market exchange rate for the whole year of 2021 and 2022, it dropped by 32.9% from 28.9 manat in 2021 to 19.4 manat in 2022 (January-October). Prices of sunflower oil sold in Turkmenistan fell by 15% in October 2022 compared to the similar month of last year.
There are no import duties or tariffs imposed by Turkmenistan on seed oils including sunflower and vegetable oils.
Obstacles to domestic production
There is only one company “Gündogar Akymy” producing sunflower oil at home, which was founded in 2019. It has a production capacity of 7200 tonnes of sunflower oil, however, its actual production in the first 8 months of 2021 was a mere 60 tonnes. The country imported 15,500 tonnes of sunflower oil from Russia in 2021. Turkmenportal states that the company holds the largest field for oilseed crop in Turkmenistan amounting to 6000 hectares of land, however, it is yet to be seen if this company can maximize its production output to its full capacity. According to Business Turkmenistan, two other domestic companies are planning on producing sunflower and vegetable oils, however they have not started the line of production yet.
Export obstacles imposed by Russia
Russia imposed an export quota for sunflower oil between 15 April and 31 August 2022 at 1.5 million tonnes for the given period with the aim of avoiding oil shortages and easing pressure on domestic prices. Export quota, the amount, which is allowed to export was further increased by 400,000 tonnes in July 2022 citing sufficient domestic supplies to meet the local demand. Export quotas on sunflower oil expired on 31 August 2022 and has not been extended.
Moreover, the Russian government imposed export duties (taxes) for sunflower oil from 1 September 2021 to 31 August 2023. The export duties are levied as a floating rate, which changes based on the changes in the market prices of sunflower oil. Export duties for this product amounted to 227$ per tonne in October 2021 compared to zero in October of 2022. While there were no export duties in October 2022, its value was a lot higher in previous 6 months of 2022 averaging at 334$ between March-September of 2022.
What about monthly price changes of palaw?
On a monthly basis, prices of palaw ingredients have been decreasing steadily over the last year from 100.4 manat in October 2021 to 84.5 manat in October 2022, which is a 15.9% decline. When it comes to the black-market exchange rate of the manat/USD, it declined from 22.9 manat in October 2021 to 19.5 manat in October 2022, which is a 14.8% decrease (see Figure 3).
Prices of ingredients in the Palaw Index are collected for 1 kg of onion, carrot, beef, rice, and flour, and 1 liter of cooking oil. Based on the methodology, in order to cook palaw for a family of four, we use 0.3 liters of cooking oil, 0.5 kg of onion, 1 kg of carrots, 0.6 kg of beef, 1 kg of rice, and 0.5 kg of flour in our formula. Please click here to learn more about the methodology of the Palaw Index.