CONSUMERS should expect to pay even more for vegetable cooking oil as prices could remain elevated in the short term before moderating in the latter part of the year.
The price of cooking oil in South Africa has risen by more than 70 percent due to poor harvests of oil-producing crops such as sunflower, palm, soya and canola last year.
Last week, FNB senior agricultural economist Paul Makube said crop production of sunflowers in South Africa fell 12 percent, creating a shortage as demand had not declined.
Makube said South Africa did not produce enough vegetable oil to meet local demand, meaning the rest had to be sourced from Europe.
He said South Africa produced about 800 000 tonnes of sunflower seeds per annum at its highest and 700 000 tonnes at its lowest.
“This is not enough to meet our local demand. So we import,” Makube said. Every commodity has its own value chain.
“The vegetable complex has also affected grains. You can see that wheat has remained elevated a bit longer despite the fact that we have a bumper crop season.”
A 5-litre bottle of cooking oil on promotion costs almost twice what consumers paid two years ago, rising from R90 to above R150.
According to Statistics South Africa, oils and fats products hit an inflation rate of 16.7 percent in April.
This was the highest since August 2016 as cooking oil prices rose 21.6 percent over the past 12 months.
“The international prices of vegetable oil have seen a spike recently because of supply shortages and due to weather concerns, but demand has remained strong,” Makube said. “Prices are getting back to January and February 2021 levels.
“Countries like Indonesia are cutting palm oil exports to increase their competitiveness.”
Indonesia is planning to revise export tax as authorities intend to cut their crude palm oil export levy, leading to more competition to gain export market shares and probably pressuring prices.
In the US, soybean prices have declined, weighed down by a possible move to reduce biodiesel production, ongoing weather concerns and oversupply worries.
Last month, the largest canola crusher SOILL said there had been shortages in sunflower seed production in the Black Sea region, predominantly in Ukraine and Russia.
Makube, however, said there was hope that the oil prices would moderate in the second half of the year if the rand maintained the momentum below R14 to the dollar.
He said consumers could have reprieve towards October/November with the harvesting of sunflower and canola in Europe, weather permitting.
“In the short term, prices will remain elevated but will probably decline in the second half of the year,” Makube said.
“Given the recent cooling of prices, and also the rand remaining at relatively firmer levels, we might see improvement in the prices. The second half of the year should see the problem of rocketing dissipating.”