Soybean Oil Supply Squeeze Persists In Dhaka Despite Price Hike

🌳 Soybean oil supplies remain tight in the city despite a recent increase in prices, while prices of bread, cakes and other bakery products witnessed a notable hike. The persistent supply squeeze — coming after the government approved a Tk 5 per litre increase in bottled soybean oil prices — exposes the limits of price-adjustment as a tool for restoring market equilibrium in Bangladesh's edible oil value chain.

🛒 Grocers on Thursday said soybean oil has become increasingly difficult to procure from the distributors, with some shops receiving only limited quantities even after placing orders with suppliers. A number of small grocery shops have reportedly been unable to obtain the cooking oil at all. "Even after placing orders, companies are not supplying oil. There is no soybean oil in my shop, and customers are leaving without buying it," said Ratan Bala, a grocer at Buddhijibir Dhal in Rayer Bazar.

"Suppliers often take several days to deliver oil after receiving orders, while the quantity supplied remains below demand," he said. The supply situation has remained tight even after the government recently approved a Tk 5.0 a litre increase in the price of bottled soybean oil. Traders had sought a Tk 10 increase. Although the government approved the price increase only for bottled soybean oil, traders also raised prices of loose soybean oil.

💰 Price Movements Across Edible Oils

Loose soybean oil was sold at Tk 185-190 a litre, marking Tk 5.0-10 a litre hike in a week. Palm oil price also surged by Tk 5.0 a litre to Tk 175-180 a litre. The simultaneous increase across multiple edible oil categories — soybean and palm — indicates that the supply squeeze is not specific to a single commodity but reflects broader pressure on Bangladesh's edible oil import and distribution system.

• 💵 Government-approved bottled soybean oil price hike: Tk 5/litre
• 📊 Traders' original demand: Tk 10/litre increase
• 🌳 Loose soybean oil price: Tk 185-190 per litre (+Tk 5-10/week)
• 🌿 Palm oil price: Tk 175-180 per litre (+Tk 5/week)
• 📈 Loose atta price: Tk 48-50 per kg (+3.16% MoM)
• 📈 Loose maida price: Tk 65-70 per kg (+8% MoM)
• 📈 Packaged maida price: Tk 75-85 per kg
• 🍞 460g bread loaf price: Tk 50-60 (from Tk 45-50)

📜 Flour And Bakery Items Catch The Price Contagion

Meanwhile, flour prices increase pushed up costs for bakery items. According to the latest market analysis by the Trading Corporation of Bangladesh (TCB), the minimum retail price of loose atta has increased to Tk 48-Tk 50 a kg from Tk 45 a kg a month ago, representing an increase of 3.16 per cent. Prices of loose maida have risen more sharply, with the commodity now selling for Tk 65-Tk 70 a kg compared with Tk 60-Tk 65 a month earlier. This represents an increase of around 8.0 per cent.

The price of packaged maida has also increased to Tk 75-Tk 85 a kg from Tk 65-Tk 75. Traders attributed the higher flour prices to increased production costs, including higher electricity prices and gas supply problems. Followed by the flour price hike, costs of bread, biscuits and other bakery products have risen in the retail market. A 460-gram loaf of bread from different companies is now selling for Tk 50-Tk 60, compared with Tk 45-Tk 50 previously.

🏛 Why Soybean Oil Supply Is Tight

Bangladesh imports over 2.5 million tonnes of edible oils annually — primarily crude soybean oil and palm oil — to meet domestic consumption that exceeds local production capacity. The supply chain involves international suppliers (mainly in Argentina, Brazil, Indonesia and Malaysia), Bangladeshi importers who open letters of credit (LCs), refineries that process crude oil into refined edible oil, and a distribution network of dealers and retailers.

The current supply squeeze reflects multiple compounding pressures. First, global soybean oil prices have been volatile amid supply concerns in South America and rising demand for biofuels in the United States and Europe. Second, Bangladesh's foreign exchange reserves — though stabilising — remain under pressure, with Bangladesh Bank continuing to carefully manage dollar allocation for non-essential imports. Third, the working capital constraints facing many importing firms (in a banking sector with 32.78% NPL ratio) have limited their ability to maintain large inventory buffers.

The combination has meant that even after the government approved a price increase — which should have improved importing margins and incentivised higher LC opening — physical supplies to retail have not normalised. The lag between price adjustment and supply response typically runs 4-6 weeks as importers open new LCs, crude oil is shipped from origin countries, refineries process the crude, and finished oil moves through the distribution network.

📊 Implications For Bangladesh's Inflation Trajectory

The soybean oil supply squeeze carries significant implications for Bangladesh's broader inflation trajectory. Edible oil is a critical consumption item for low- and middle-income households, accounting for a meaningful share of monthly food expenditure. The Tk 5-10 per litre price increase — combined with supply tightness that forces households to either substitute to higher-priced alternatives or reduce consumption — directly feeds into headline consumer price inflation.

With the latest inflation reading at 8.26% in August 2026 — well above the government's 7.5% FY27 target — and food inflation running higher than headline inflation, the edible oil price pressure complicates the central bank's monetary policy stance. The combination of supply-driven food inflation (oil, flour, bakery items) and demand-side monetary easing (policy rate cut to 9.5%) creates a particularly challenging policy environment for Bangladesh Bank.

🍞 Bakery Industry Under Pressure

For Bangladesh's bakery industry — which includes both large industrial bakers and thousands of small neighbourhood bakeries — the simultaneous increase in flour, oil and energy costs creates a severe margin squeeze. The 8% month-on-month increase in loose maida prices is particularly damaging, as flour typically accounts for 30-40% of bakery product cost of goods sold. The combination of input cost inflation and weak consumer demand risks pushing many small bakeries into distress.

The bakery industry also serves as an important source of affordable protein and calorie intake for low-income urban consumers — particularly day labourers, transport workers and garment factory workers who rely on bread and biscuits as a low-cost meal option. Price increases in this segment therefore have direct welfare implications for some of the most economically vulnerable populations in Bangladesh's cities.

🌏 What Comes Next

The coming weeks will reveal whether the Tk 5 per litre price increase for bottled soybean oil is sufficient to restore supply equilibrium. If supplies do not normalise within the typical 4-6 week lag, the government may face pressure to approve a further price adjustment — bringing the total increase closer to the Tk 10 per litre that traders originally sought. The alternative — maintaining price controls and tolerating continued supply shortfalls — risks creating a parallel black market at significantly higher prices.

For Bangladesh's broader trade policy, the edible oil squeeze underscores the country's structural vulnerability to imported food inflation. With LDC graduation approaching in November 2026 and concessional financing windows narrowing, building strategic reserves of critical food commodities — and investing in domestic oilseed production capacity — will be essential to managing future supply shocks. The current episode offers a preview of the food security challenges that will intensify in the post-LDC era, when Bangladesh's access to import financing will depend more heavily on commercial terms rather than concessional support.