Sunflower Shortage: Why Cooking Oil Has Gotten So Expensive | Cost of living crisis

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Sunflower Shortage: Why Cooking Oil Has Gotten So Expensive | Cost of living crisis

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Whether it’s French fries, stir-fry or curry on the menu, the financial shock of the war in Ukraine is strongly felt in the kitchen as cooking oil prices hit record highs.

The cost had already skyrocketed even before Vladimir Putin’s invasion, but now vegetable oil costs £ 1.30 per liter at the supermarket, up 23p, or 22%, a year ago. Sunflower oil, of which Ukraine and Russia are the main producers, is also up sharply, by 17 pence to 1.34 pounds per liter, according to NielsenIQ Scantrack data.

Three out of four households buy cooking oil and in the UK they spend nearly £ 400 million a year on the stuff. Shoppers stock up every 8-10 weeks, says NielsenIQ’s Mike Watkins, which means there may be “shelf shocks for many” when they return.

In addition to being a staple for cabinets, cooking oil is used throughout the food industry, from biscuits to ready meals to long-life custard, so rising costs and shortages have ripple effects.

Vegetable oil price chart

This week, the UK’s largest sunflower oil bottler warned that stocks were running out with only a few weeks left, and it emerged that manufacturers of products that rely on it, such as potato chips and baked potato chips, are were forced to change their recipes and use other types of oil.

Home cooks can cope with higher prices by changing their cooking method or swapping for own-brand oils from cheaper supermarkets. However, for restaurants and food companies that use huge amounts of cooking oil, shortages and rising prices add to the pressure from other rising costs.

Yawar Khan, who owns Akash Tandoori in Wallington, South London, says a 20-liter drum of vegetable oil cost around £ 22 cash-and-carry last month, but today the price is closer to £ 40. Buyers were also limited to two kegs each as a sign of concern over shortages.

So how did the price of this essential kitchen get so high?

War

A sunflower crop near Horishni Plavni, Ukraine
A sunflower crop near Horishni Plavni, Ukraine: The supply of millions of tons of sunflower oil has been trapped in the country since the war began. Photograph: Evgeniy Maloletka / Bloomberg / Getty Images

Ukraine and Russia account for around 60% of world sunflower oil production, and the conflict has hit supplies hard. In UK stores, sunflower oil accounts for around a fifth of the market by value and 44% by volume, according to NielsenIQ. It is one of the “big four” vegetable oils, classified behind palm, soybean and rapeseed in that order (the oil sold as “vegetable oil” is a blend of various seeds).

Sunflower oil price chart

When the supply of one of the big four is cut off, a beetle is activated to purchase a replacement. The price of sunflower oil jumped 60% after the invasion of Ukraine, from £ 1,130 per tonne in February to over £ 1,800 in March, according to Mintec analysts. This has had a ripple effect on palm, rapeseed and soybean oil prices.

The war has trapped millions of tons of sunflower oil earmarked for foreign buyers in Ukraine, causing a major supply shock. “Overnight we had a situation where the market couldn’t deliver because the supplies were not coming from Ukraine to the EU and were being processed, or from Ukraine to other countries of the world,” says Gary Lewis, of the oil importer. KTC Edibles.

Sunflower oil map

“The big impact in the UK and the EU has been on rapeseed oil – as you can imagine, the prices have gone crazy.”

The next few weeks will be crucial. Volodymyr Zelenskiy, the Ukrainian president, encouraged those farmers not directly affected by the war to plant as much as possible, with the optimal time several weeks away. “If there is a ceasefire, we will be able to assess what stocks are left in the country and when they will be available,” says Lewis. “Uncertainty is what caused the panic buying.”

COVID-19

Plantation workers prepare to unload freshly harvested oil palm fruit clusters at a collection point
Malaysia’s palm oil crop was hit when the country closed its borders due to the Covid crisis. Photograph: Melvin Migin / Alamy

The ongoing blockages of the pandemic have fractured a delicately balanced global supply chain. From farmers to factories, freight workers and retailers, the crisis has caused massive upheaval and triggered fluctuating levels of demand. One big casualty was the harvesting of palm oil in Malaysia, the second largest producer in the world. Yields plummeted to a nearly 40-year low after it closed its doors to migrant workers who usually bring it in.

At the start of the pandemic, palm oil changed hands for around £ 500 per tonne, according to Mintec. In one year it went up by 50%. Today it is aiming for £ 1,300 a tonne, increasing the cost of manufacturing everything that uses it, from cakes and biscuits to cosmetics, shampoo and detergent.

Vito Martielli, senior analyst for cereals and oilseeds at Rabobank, says the “stocks-to-use” ratio – an indicator of the health of the global vegetable oil market – has been down for eight years, from about 16% in 2015. , the equivalent to 58 days of supply, about 12%, or 44 days.

Climate crisis

A farmer spraying pesticides in his rapeseed field near Roederhof
Canadian rapeseed producers had a disastrous growing season last year. Photograph: Peter Foerster / EPA

In the past, the global market would have witnessed major supply shocks every five to seven years, but in the past 10 years these have become much more frequent, with climatic conditions such as drought and frost and sometimes diseases affecting crops more often, says Martielli. .

In 2021, Canadian farmers, the largest producer and exporter of rapeseed, had a disastrous growing season after temperatures soared to nearly 50 ° C. The price of soybean oil is rising right now due to lower yields expected by growers in Brazil, Argentina and Paraguay – which account for more than 50% of the world’s supply – after a severe drought.

Last year drought in Ukraine and Russia pushed sunflower oil prices to a 12-year high of nearly £ 1,200 per tonne, although that record was wiped out by the financial shock of the war.

“Over the past two years we have seen a lot of crop problems around the world,” adds Lewis. “The high temperatures in Canada have had a huge impact on rapeseed production, which has had an impact on EU prices, because these ripples travel around the world.”

Biofuels

The markings on the gas pumps show biodiesel or ethanol, diesel and regular gasoline
Biofuels are used to power vehicles and in industry. Photograph: Sean Gallup / Getty Images

According to Rabobank, biofuels account for around 15% of the world demand for vegetable oil. This use, as countries seek to reduce their dependence on fossil fuels, has previously been accused of driving up food prices.

Ariel Brunner, head of EU policy at BirdLife International, an environmental NGO, recently told New Scientist: “We are literally burning a lot of food.” Governments had the power to change this because the biofuel market was entirely subsidized, he added.

The loss of sunflower oil from Ukraine and Russia could be mitigated by diverting crops from fuel tanks. This would help lower food prices, a move that would benefit those with the lowest incomes most.

Lewis says 50% -60% of the rapeseed grown in Europe and 60% of the palm oil imported from the region is turned into biodiesel. “Over the past 20 years, the increase in demand for biodiesel has spurred production, but there will always be a tipping point where we will argue about fuel versus food,” he says.

There was an argument to temporarily suspend the use of edible oils in biodiesel due to the current crisis, he said. “This would have a dramatic impact on availability for the food industry and alleviate some of the pressures.”

“The biggest concern is evaluating our consumers”

curry dishes and Indian food
Indian restaurants and curry restaurants can consume 100 liters of cooking oil per week, says Yawar Khan, restaurateur and president of the Asian Catering Federation. Photography: Natalia Lisovskaya / Shutterstock

“We haven’t raised our prices yet, but we’re thinking about it,” says Khan, who says 10% to 15% increases will be needed this month to cover his restaurant’s higher operating costs.

Khan, who is also the president of the Asian Catering Federation, says his restaurant uses 40 liters of oil per week, but larger venues could go as high as 100 liters. The group members’ biggest concern, he says, is that they are reluctant to raise prices to cover increased overheads for fear of “pricing” would-be diners. “If your eating out bill increases by £ 10 or £ 20, how many times will you visit your local restaurant or order takeaway?”

His restaurant’s economy is also impacted by the soaring cost of chicken, spices and skyrocketing wages, which have risen by 15-20% this year.

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