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Problems with cooking oil are exacerbating a possible global food crisis

The global supply of cooking oil, already reduced by the war in Ukraine, is on the verge of diminishing even more, Bloomberg reports.


 


Two months after Russia's invasion of Ukraine disrupted global trade in agricultural products, Indonesia has banned exports of cooking oil amid problems with local market supply and rising prices, a decision in addition to other protectionist measures. agricultural products adopted worldwide. Indonesia is responsible for more than a third of the world's vegetable oil exports, and China and India, the top two most populous countries, are among its main buyers.


 


Deliveries of cooking oil from Indonesia "are irreplaceable. It is certainly a major blow," said Carlos Mera, Rabobank's chief research officer.


 


Indonesia is the largest producer of palm oil, the most widely consumed type of edible oil in the world. The announcement of a ban on exports by the Southeast Asian country on Friday sent futures quotations for soybean oil, an alternative to palm oil, to its highest level in history. In the UK, some supermarkets have decided to limit their purchases of cooking oil, such as sunflower oil, olive oil and rapeseed.


 


While limited supply and high prices would exacerbate food inflation in rich countries such as the United States, the greatest impact will be felt in developing countries such as India. These countries depend on imports of palm oil as a cheap alternative to more expensive products, such as soybean oil, sunflower oil or canola.


 


"We are extremely shocked by Indonesia's decision. We did not expect such an embargo," said Atul Chaturvedi, chairman of a professional association of food oil traders in India.


 


In the US, soybean oil futures prices have almost doubled since the beginning of 2021, driven by higher demand for biofuel-based ingredients. Prices hit an all-time high after the Ukrainian invasion disrupted sunflower oil supplies and boosted demand for other types of cooking oils.


 


Canoe prices hit an all-time high last year due to a drought that devastated North American crops. Prices for palm oil in Asia have risen by 50%, and in rapeseed oil they have risen by 55% in Europe in the last 12 months.


 


However, "despite record prices, the demand for vegetable oils remains high, as these oils are an essential component in the diet of all countries and especially in countries such as India, Pakistan and Bangladesh," said analyst John Baize. He stressed that the restrictions announced by Indonesia are important, but are not expected to last too long. Baize said that in 2021, Indonesia exported 26.87 million tons of palm oil, compared to 15.28 million tons consumed in the domestic market.


 


For the time being, the Indonesian embargo is exacerbating concerns about food costs and supply crises, with fears that other countries may make similar decisions as the war in Ukraine continues. "We may see more decisions like this. That exacerbates the concerns," Carlos Mera said.


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