Tight supplies are pushing up prices of a broad range of vegetable oils, including palm and soy, the two most widely consumed edible oils used in many food products.
The benchmark palm oil contract on the Bursa Malaysia Derivatives Exchange recently hit a 10-year high of 4,251 ringgit ($958) a tonne. Spot rapeseed oil prices also reached new highs, while CBOT soybean, canola, and sunflower oils continue to post significant gains. Vegetable oil prices also have risen in tandem with crude oil, as some edible oils are made into biofuels.
Heavy rains brought on by La Niña caused palm oil production to drop in each of the past five months in Malaysia, the No. 2 palm oil producer. Labor shortages as a result of the COVID-19 pandemic also have hurt production.
Meanwhile, global soybean shortages have driven soy oil prices higher. US soybean supplies are tighter than they’ve ever been, and drought threatens the soybean crop in Argentina, the top exporter of soy oil and meal. Production of other edible oils also has fallen, including sunflower seeds in Ukraine, and rapeseed in Ukraine and Canada. In addition, Russia’s export tax increase on sunflower seeds, to combat inflation, has cut into world supplies.
China is the largest consumer of vegetable oils at nearly 40 million tonnes per year, with imports supplementing domestic production. But soybean shipment delays out of Brazil have caused China to sharply draw down its soy oil inventories. China’s cash prices for soybean oil, its most widely consumed oil, have jumped nearly 20% since Jan. 1.
As food inflation becomes a growing problem worldwide, the higher prices of edible oils, which directly affect input costs for many food products, take on increased importance.
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