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    Russia's war heats up cooking oil prices in global squeeze

    Russia's war heats up cooking oil prices in global squeeze

    Russia's war heats up cooking oil prices in global squeeze
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    By Sangam Singh   IST (Published)

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    Apart from Russia-Ukraine war, global cooking oil prices have been rising since the COVID-19 pandemic due to poor harvests in South America due to labor shortages and steadily increasing demand from the biofuel industry. Early this month, oil prices were nearly four times higher than they were in 2019.

    In early April, oil prices were nearly four times higher than they were in 2019. Global cooking oil prices have been rising since the COVID-19 pandemic began for multiple reasons, from poor harvests in South America to virus-related labor shortages and steadily increasing demand from the biofuel industry.
    The war in Ukraine which supplies nearly half of the world's sunflower oil, on top of the 25 percent from Russia has interrupted shipments and sent cooking oil prices spiraling. It is the latest fallout to the global food supply from Russia's war, and another rising cost pinching households and businesses as inflation soars. The conflict has further fueled already high food and energy costs.
    The food supply is particularly at risk as the war has disrupted crucial grain shipments from Ukraine and Russia and worsened a global fertilizer crunch that will mean costlier, less abundant food.
    The loss of affordable supplies of wheat, barley, and other grains raises the prospect of food shortages and political instability in Middle Eastern, African, and some Asian countries where millions rely on subsidized bread and cheap noodles.
    Vegetable oil prices hit a record high in February, then increased another 23 percent in March, according to the UN Food and Agriculture Organization. Soybean oil, which sold for $765 per metric ton in 2019, was averaging $1,957 per metric ton in March, the World Bank said. Palm oil prices were up 200 percent and are set to go even higher after Indonesia, one of the world's top producers bans cooking oil exports starting Thursday to protect domestic supply.
    Across the world in London, Yawar Khan, who owns Akash Tandoori restaurant, said a 20-liter drum of cooking oil cost him 22 pounds ($28) a few months ago; it's now 38 pounds ($49).
    We cannot pass all the price (rises) to the consumer, which will cause a catastrophe, too, said Khan, who also struggles with rising costs for meat, spices, energy, and labor.
    Big companies are feeling the pain, too. London-based Unilever maker of Dove soap and Hellmann's mayonnaise said it has contracts for critical ingredients like palm oil for the first half of the year. But it warned investors that its costs could rise significantly in the second half.
    Cargill, a global food giant that makes vegetable oils, said its customers are changing formulas and experimenting with different kinds of oils at a higher rate than usual. That can be tricky because oils have different properties; olive oil burns at a lower temperature than sunflower oil, for example, while palm oil is more viscous.
    Prices could moderate by this fall when farmers in the Northern Hemisphere harvest corn, soybeans, and other crops, said Joseph Glauber, a senior research fellow at the International Food Policy Research Institute. But there's always the danger of bad weather. Last year, drought pummeled Canada's canola crop and Brazil's soybean crop, while heavy rains affected palm oil production in Malaysia.
    Farmers may be hesitant to plant enough crops to make up for shortfalls from Ukraine or Russia because they don't know when the war might end, said Steve Mathews, co-head of research at Gro Intelligence, an agriculture data and analytics company. If there were a cease-fire or something like that, we would see prices decline in the short run for sure, he said.
    In Longer-term, the crisis may lead countries to reconsider biofuel mandates, which dictate the amount of vegetable oils that must be blended with fuel in a bid to reduce emissions and energy imports. In the US, 42 percent of soybean oil goes toward biofuel production, Glauber said. Indonesia recently delayed a plan to require 40 percent palm oil-based biodiesel, while the European Commission said it would support member states that choose to reduce their biofuel mandates.
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