Source: Financialpost.com
Canadians may want to start finding alternatives for cooking oil. In the past six months, the cost of vegetable oil has increased by 25 per cent — and prices are only set to get higher in the months ahead.
According to Sylvain Charlebois, professor and senior director at Dalhousie University’s Agri-Food Analytics Lab, the world is slowly running out of vegetable oil and its impact will be felt everywhere.
“Vegetable oil is not just about frying, it’s in everything,” wrote Charlebois in a recent note. “Since vegetable oil is one of the most universal and versatile ingredients out there, the entire planet will be impacted, one way or another.”
Different types of cooking oil — palm, canola, sunflower and soybean — have all been affected.
Export challenges have contributed to a 50 per cent increase in the average price of palm oil. On April 28, Indonesia — the largest producer of palm oil — began an embargo on its exports as prices in the country went up by 40 per cent. Now, Malaysia, the second largest exporter of palm oil, is facing a labour shortage as it looks to meet global demand.
Indonesia accounts for over half (55 per cent) of the world’s palm oil exports while Malaysia accounts for 31.2 per cent. The impact of these challenges has been enormous for large food companies who purchase the product regularly including Nestlé, Mondelez and Ferrero Rocher.
Export conditions are even worse for sunflower oil because of the ongoing Ukraine-Russia conflict. Ukraine, which is responsible for exporting over 5.4 million tonnes or half of the world’s supply of sunflower oil, has been fighting Russia’s invasion since Feb. 24. Meanwhile, Russia, which exports a quarter of the vegetable oil, has been hit by sanctions that will make it hard to find buyers.
Despite being the largest canola grower, Canada had to import canola after a severe drought cut crops last year. The dry spell resulted in the country’s smallest harvest in 13 years and left scarce supplies for 2022. But in spite of growing demand and record prices — which are up 55 per cent — farmers are moving away from planting canola due to fears of recurrent droughts and high fertilizer costs.
The major exporters of soybean oil have been dealing with similar droughts and supply chain disruptions in recent years. Argentina, Paraguay and Brazil are experiencing a harsh heatwave in South America which has put a damper on their soybean production.
“Our appreciation of vegetable oil will likely reach new levels in months to come,” wrote Charlebois. “The importance of an ingredient that we have all taken for granted in our kitchens, will be much more evident.”
Charlebois noted that even bountiful harvests from big exporting countries such as Holland and Germany will be inadequate to offset the expected deficit this year.
But, decreasing the current amount of vegetable oil, about 15 per cent, used for energy could help, he suggested.
Charlebois said his team expects more countries to ban exports of commodities to secure their food supply, putting more pressure on markets and raising prices even further.
“Over the next several months, things will most certainly get ugly to a point where many will experience famine or acute hunger, in fact, more than 100 million people. Devastating,” he wrote.
“Despite all of this, as Canadians, we’re the lucky ones. If your grocer is rationing vegetable oil, don’t be surprised. As consumers, we should feel lucky just to have access to some vegetable oils.”
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