When the price of cooking oil rises as it is now, the ripples are felt across the globe – commercially and domestically.
From a consumers point of view, cooking oil is bought on a regular basis by 75% of supermarket customers for home cooking. It’s also a vital ingredient for most restaurants and takeaways with large Indian restaurants using 100 litres a week. But it is also essential in the production of many items available to buy at the supermarket.
And so now a perfect storm of climate, war and geo-politics has turned a cooking oil price ripple into a tidal wave with producers, manufacturers, retailers and consumers all in its path.
So why are prices rising? There are many reasons.
Ukraine is the biggest producer of sunflower oil – accounting for two-thirds of all global exports of the oil – and Russia’s invasion of the country has led to the destruction of storage facilities, blockading of exports and halving of planting for the forthcoming crop. Whilst this is, of course, devastating for the country, in global terms sunflower oil accounts for just nine per cent of usage, so why can’t manufacturers simply switch to other oils?
There are four main types of cooking oil – palm oil – which accounts for 35% of world production, soybean (29%), rapeseed (14%) and sunflower (9%) with various others, mainly nut oils, making up the rest. You may have heard too of canola oil which is a genetically modified version of rapeseed. But switching to a different oil used in food production requires complete re-labelling, and added cost, of any goods sold in supermarkets, this is compounded if the substitute oil is genetically modified.
And so while the war in Ukraine has had a devastating effect on the supply of sunflower oil, there are other factors at play which have had severe impact on other oils.
For example, Indonesia, the world’s main supplier of palm oil, caused shockwaves when the Government banned its export in order to stabilize internal price and supply and while UK consumers rarely use palm oil to cook at home, it is used in many staples of the shopping basket including processed foods, crisps and snacks, biscuits and packaged bread and a range of consumer goods including shower gel, soap and cosmetics.
While the export ban has now been eased, the price rise will be felt for some time as will the effect of the Covid 19 pandemic. That impact includes a drop in harvest due to the ban on migrant workers that would usually find seasonal employment harvesting the palm oil crop in countries such as Malaysia.
Canada is the world’s largest producer and exporter of rapeseed/canola. Last year drought led to the crop size falling by over a third with predictions for this year much the same. To compound matters, many farmers are switching from rapeseed to wheat production.
Soybean crops have also suffered from drought in two of the major exporters – Brazil and Argentina – where, again, export restrictions and higher tariffs to protect the domestic supply have impacted heavily on export prices. The United States, traditionally an exporter of soybean, is also likely to now need all of its production to meet domestic needs.
This crop is also used in biofuel and can find itself at the centre of a food v fuel battle.
So a variety of factors have combined to produce the global rise in the price of cooking oil. While food inflation in supermarkets looks set to reach 10% this year, a recent Guardian article illustrated how cooking oil price has risen more than 100% since the first lockdown in March 2020.
Many suggestions have been put forward as to how the UK can ensure supply and stable prices for the future, including a national food strategy involving Government, producers and retailers. This could provide support to farmers and ensure a steady supply of essential meat, dairy and crops that would offer resilience from world events.
But even that concerted approach may not be enough. The major food oil produced in the UK is rapeseed and the harvest has halved in just four years due to pest damage and unfavourable weather.
Unfortunately, higher prices are as inevitable for cooking oil as they are for the vast majority of other foodstuffs and it’s a price the whole world is having to pay.