Indonesia deals a painful blow to the world cooking oil market amid “hot water”
According to Bloomberg, the world supply of cooking oil, which has been “squeezed” because of the geopolitical crisis in Eastern Europe, is now more scarce.
The current shortage of cooking oil makes the world hunger crisis worse than ever.
And in this “hot water” situation, Indonesia deals more pain when it is stopping palm oil exports in the context of high inflation, severe weather and scarce supply.
Pain from Indonesia
Two months after the February events in Eastern Europe that brought global agricultural trade to a halt, Indonesia announced it would ban the export of cooking oil amid local shortages and soaring prices, fueling conservationism. households around the world.
Indonesia accounts for more than a third of global vegetable oil exports, of which India and China – the two most populous countries are among the largest buyers of oil.
Mr. Carlos Mera, Dutch multinational banking and financial services company Rabobank, said the world “cannot replace” Indonesia’s cooking oil supply. “Indonesia’s supply of cooking oil to the world is ‘irreplaceable. It’s definitely a big hit,” he asserted.
Indonesia is the world’s largest producer of palm oil, the most consumed edible oil in the world.
The Southeast Asian nation’s announcement of the ban in April sent the price of US oil futures tied to soybean oil, an alternative to palm oil, soaring to a record high for a second day. three in a row.
In the UK, some supermarkets are restricting the purchase of cooking oils such as sunflower, olive and canola.
Russia’s move in February has thrown the sunflower oil market into chaos and is squeezing supplies of other vegetable oils used in food, biofuels and personal care products.
Uncertainties about weather around the world also pushed the world’s major cooking oil producers in fear of shortages.
Soybean production in South America – the world’s largest producer – has plummeted because of the drought.
The drought in Canada also reduced canola oil production and made available supplies very limited.
Limited supplies and rising prices could exacerbate inflation for food items like salad dressings and mayonnaise in major economies like the United States. Meanwhile, developing countries like India will be hardest hit.
Because they depend on imported palm oil, the vegetable oil is cheaper than soybean oil, sunflower oil and more expensive canola oil.
Atul Chaturvedi, president of the Solvent Extraction Association and Edible Oil Trade Group of India, said: “We are extremely shocked by Indonesia’s decision and did not expect a ban like this.”
Rising core food costs have also led to the biggest controversy in a decade over the use of farmland for fuel production.
The American Bakery Association is warning about empty grocery store shelves.
Price changes can lead to social unrest, especially in India, according to Brice Dunlop, an expert at Fitch Solutions. “India has had a lot of riots related to food shortages, while vegetable oil is a main ingredient in many dishes here,” he warned.
Tensions between food and fuel are also growing in other regions, including Indonesia.
According to Tosin Jack, director of commodity market research at Mintec, the world’s leading provider of global commodity price data in the UK, Indonesia’s latest decision will certainly make things worse. Food inflation is already at a record high.
For manufacturers of packaged goods like potato chips, Indonesia’s move makes them even more miserable.
People queue to buy affordable cooking oil in Palembang, Indonesia on February 24. Photo: AFP
Not only Indonesia
Besides Indonesia, other governments are also getting involved.
They restrict exports, control prices and prevent hoarding. However, these moves have not been able to prevent prices from rising, forcing consumers to cut spending.
The price of U.S. soybean oil has nearly doubled since early 2021, in part due to higher demand for the feedstock for biofuel production. Prices then rallied to record highs following the February events in Eastern Europe, which disrupted sunflower oil shipments and stoked demand for substitutes.
Canadian canola oil has climbed to a high An all-time high last year when a devastating drought caused crops to shrink across the North American prairies.
Palm oil in Asia has increased by about 50% and canola oil in Europe by 55% in the past 12 months.
“Despite record high prices, demand for vegetable oils remains strong because vegetable oils are an essential part of the economy,” said John Baize, an independent analyst and consultant for US soybeans. diet in all countries and especially in countries like India, Pakistan, Bangladesh”.
He called the restriction on Indonesia’s palm oil exports a “big problem” but expected the restrictions would not last long.
Now, Indonesia’s ban has even raised concerns about food shortages and rising prices in the country. Because other countries can also make similar moves if the crisis situation in the world continues to drag on.
“We could see a few other products put on the export ban list,” said Rabobank expert Mera. “This could exacerbate concerns.”
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