The cooking oil market is sizzling. Soaring food prices, inflation, and war are causing increased protectionism of food around the world, including the latest example: palm oil.
Indonesia is the world’s biggest exporter of edible oils, but a new policy dictates 30% of palm oil will now have to be allocated to the local market, keeping the commodity affordable at home. The policy will stay in place at least six months until supply returns to normal.
Buyers are limited to quotas of cooking oil, and supermarkets are already running out ahead of the Islamic fasting month, Ramadan, which normally increases demand for oil.
And this: Russia and Ukraine supply about 80% of sunflower oil. With the current conflict, as much as 60% of sunflower oil exports from the region will be delayed. That’s about 8M tonnes. And according to S&P Global Platts data, Ukrainian sunflower oil futures have already increased 32% as a result.
A slippery slope: Palm oil stocks and decline in export surpluses could cause record prices in the coming months. That’s on top of this year’s prices, already on a 38% incline from the beginning of 2022.
Meanwhile… Vegetable oil prices have also been on an uptick over the past year because of supply. Soybean oil could be an alternative… but not a quick one, given the short notice, continued supply chain issues, and rapidly changing world market.