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Edible vegetable oil prices explode up to a whopping 80%

PRICES are exploding for virtually every vegetable oil resulting in a dramatic situation, says vegetable oil expert Thomas Mielke. | Reuters

PRICES are exploding for virtually every vegetable oil resulting in a dramatic situation, says vegetable oil expert Thomas Mielke. | Reuters

Published Mar 11, 2022


EDIBLE vegetable oil prices have increased sharply already in 2021 with the percentage changes for 2021 compared to 2020 registering a more than 80 percent increase in canola oil, palm oil up 72 percent and big increases in rapeseed oil and coconut oil, according to vegetable oil expert Thomas Mielke.

The executive director of Ista Mielke in Hamburg (Germany) Oil World said that there were also relatively moderate increases in oil mills and oil seeds in between.

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“Over the past three months prices continue to accelerate. At the beginning of March palm oil prices in Indonesia and Malaysia approached $2 000 (R30 736), three times the long range average. Similar price increases were seen in other vegetable oils. Stocks are unusually low while biodiesel mandates in most countries at the moment are not yet reduced,” Mielke said.

He was speaking at a webinar hosted by the Willowton Group yesterday.

This situation was difficult to understand for vegetable oil consumers who were suffering in African countries, Asia and many others.

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Mielke said comparing the beginning of March this year and two years ago, prices were exploding for virtually every vegetable oil resulting in a dramatic situation.

Mielke said crude mineral oil prices have also increased to new multi-year highs and the premium of vegetable oil prices over fossil fuels had widened further.

He said that consumption of vegetable oil for energy was rising with biodiesel production having increased last year to 48 million tonnes and a further increase expected so far this year.

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“At the moment 80 percent of world consumption of 17 oils and fats are used for biofuel against 10 percent a decade ago.”

Mielke asked whether the new food versus fuel demand would lead to reduced biofuel targets? “From my point of view I hope it does and the wasting of edible oils for biofuel is at least temporarily reduced or stopped.”

He said this begged the question whether there was a need consumers worldwide to apply pressure on governments of major biodiesel consuming countries to allow more vegetable oil to be made available for the food industry versus biodiesel.

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He said with crude mineral oil prices going through the roof, brent crude exceeded $130 (R1 959) per barrel, energy prices rising sharply and fertiliser prices rising sharply with production cost in total rising sharply, the world was moving into a period of higher inflation rates.

Not only for food price inflation, but also general price inflation. “And this inflation is likely to be accompanied by the slowing down of growth in many countries which in the medium term will have a bearish impact as the market is hot, the uncertainty is big and we probably have not seen the highs yet.”

The vegetable oil expert said sunflower oil, which was expected to be the price driver downwards for all the vegetable oils now in March, April and May, had just been bullish.

He said on top of that there was concern about spring plantings in Ukraine and it was unlikely that there would be normal plantings of corn and spring weed in the current situation. Plantings normally start at the end of March, accelerate in April, but with the current situation, normal sizes of plantings were not expected.

He said there was another concern that next season’s crop would be affected, which would have an impact on exports from Ukraine this season.

Mielke said it was a difficult situation and there was a lot of uncertainty. He could not tell whether the world has seen the highs or whether we will move even higher before the market turns around.

He said before Russia invaded Ukraine we had expected that world exports would be rising by 2.4 million tonnes from a year ago in February/September, 4.3 million from Ukraine.

“Unfortunately, the global market could replace only part of the sunflower oil which was not being shipped from the Black Sea in March and only part of the loss in April. This was the problem, as there were not enough palm oil supplies, insufficient soybean oil supplies and rapeseed oil was tight causing a worldwide problem.”

This tight global ration with prices going through the roof to rationed consumption.

Sunflower seed production worldwide had recovered in the current season by 7 million tonnes to 58 million record crops in Ukraine and Russia, but slow farmer selling in the first half of the season kept crushings at a level below potential. Currently, there was the suspension of crushings in Ukraine and declining crushings in Russia. There was also great uncertainty on when production would be resumed, he said.

Mielke said the missing sun oil volumes could not be replaced.

Rapeseed, canola were in a declining trend now for the past seven years. The carrying stocks from the current season further complicated the situation. Worldwide rapeseed oil and canola oil declined by 7 – 8 million tonnes due to drought last summer which was now sharply reduced.

There were small crops in Europe and also China with just two exceptions of Australia with a record crop of close to 7 million tonnes which was now resulting in large exports from Australia bringing some relief. Second, India was harvesting record crops at the moment, which would facilitate larger crushing in the Indian market. However this does not help to change the overall tight situation, according to Mielke.