- Malaysian palm oil exports as of this month is said to have risen between 9.3 per cent and 16.2 per cent.
- Current stocks in the market were manufactured using expensive CPO. As such, the lower prices shall be reflected in the market once this is cleared.
Consumers could be relieved further from the high cost of cooking oil in the coming months as the supply of crude palm regain momentum.
Crude palm price is said to have undergone significant correction globally, in turn occasioning prospects of more robust domestic export demand from the world’s top suppliers, Malaysia and Indonesia.
The demand prompted investors to open new positions after a selloff earlier this month that would send prices to an over 14-month low as revealed by Trading Economics.
Malaysian palm oil exports as of this month have risen between 9.3 per cent and 16.2 per cent.
The benchmark futures for crude palm oil have fallen by about 25.6 per cent, from $1,040 (Sh125,081) per metric tonne last month to read at $771.78 (Sh92,960) early this month.
The Kenya Association of Manufacturers (KAM) in a statement has said that oil prices in recent past months have significantly dropped and the trend is expected to grow into the coming months.
“In recent months, the price of crude palm oil (CPO) has dropped. However, the current stocks in the market were manufactured using expensive CPO. As such, the lower prices shall be reflected in the market once this is cleared,” KAM says.
It further notes that the price of cooking oil shall not reduce to earlier prices.
This is because of the ever-increasing cost of fuel, overbearing regulations and economic constraints backed by high inflation and the strengthening dollar.
There has been a subsequent rise in oil prices since February. Averagely, a litre moved from Sh346 in February, Sh430 in March, Sh408 in April to Sh455 in June.
This came up from Sh303 last year and Sh206 in 2020, meaning the price more than doubled over the past two years.
A spot check by the Star in July and the better part of August noted some brands were selling at a price between Sh400 and Sh451 per litre in the local retail space.
A recent spot check shows some brands' prices have dropped from Sh418 per litre to retail at Sh389.
Averagely across various retail shops, the one litre cooking oil retailing between Sh340 and Sh419.
To further sustain the affordable oil prices, the government is being urged by manufacturers to suspend or remove any levies that were introduced through the Crops (Nuts and Oil Crops) Regulations, 2020.
They back the move to have an immediate impact on the finished edible oil products for the benefit of consumers, thus lowering the cost of living.
While the ease in supply is likely to see price reduction, volatilities in the global forex market are expected to weigh down these gains.
In the US, the Federal Reserve has already resolved to deliver another 75-basis-point interest rate hike next week and likely hold its policy rate steady for an extended period once it eventually peaks.
If realised, that would take the policy rate to the 3-3.25 per cent target range, the highest since early 2008, before the worst of the global financial crisis.
This is expected to further strengthen the dollar against other currencies including the shilling which has already lost six per cent in value against the greenback in the past 16-months.
Weak shilling is likely to see importers pass the high exchange rate bill to consumers, pushing up the cost of commodities including cooking oil.
The country is looking at several ways to curb cooking oil price fluctuation in future, mostly looking at production of raw materials.
This is mirrored in the recent call by researchers on the government to support the growing of palm oil trees in western region.
They project the programme to save the country almost Sh16 billion annually in palm oil imports.
Research findings by Kalro show there is great potential for palm oil production and other crops that have high oil components in western, majorly Busia county.
The firm has been undertaking the palm oil research in the county to boost the programme which has been in play the past seven years to help cut the cost of cooking oil.