•Indonesia, the world's largest palm oil producer, enforced a 20 per cent retention of all planned oil exports to be sold domestically.
•The world market reacted by plugging the supply deficit with sunflower and soybean oils.
Global inflation has caused a surge in the price of basic commodities, to protect their populace.
Indonesia, the world's largest palm oil producer, enforced a 20 per cent retention of all planned oil exports to be sold domestically.
The world market reacted by plugging the supply deficit with sunflower and soybean oils.
Both of which were facing unique challenges.
Soybean oil supplies were greatly affected by the two-year drought in Argentina and Brazil due to La Nina; while sunflower oil supplies have come to a sharp slump after the start of the Ukrainian crisis, which shut down trade in the Black Sea which accounts for 76% of global sunflower oil exports.
This disruption of alternative oil supplies has forced the world to refocus solely on palm oil of which Indonesia and Malaysia combined produce more than 90% of global supplies.
But Malaysia posted weak production over the last six months, with December last year being one of the biggest month-on-month tumble in a year, thanks to the heavy precipitation and flooding as well as labour shortages, leaving the world dependent almost exclusively on Indonesian palm oil.
The expected outcome of an incredible rise in the cost of Crude Palm Oil (CPO); before Covid took a toll (around April 2020) CPO prices were around $700 per metric tonne.
This escalated due to compounding effects of Covid to about $1,490 per metric tonne, before the Ukraine-Russia war.
But after the war started, the price of CPO escalated sharply, with the first week of March recording the highest jump, from $1,760/MT to $1,980/MT.
Locally, despite the fact that Covid related factors had already caused a jump in the price of a 20 litre Jerrycan from Sh2,200 to Sh4,500 in under two years; after the invasion, the price shot up to Sh5,100 in under a week.
This rise is set to have an upward ripple effect in the prices of basic commodities and food businesses.
For instance, the cost of bread of which oil is a major ingredient as well as the cost of food in eateries and other ready-to-eat prepackaged foods.
Kenyan families have had to adjust and adapt, this can be proven by the current significant rise in demand for solid fat because it’s cheaper than liquid oils.
Retailers who measure out liquid oil have also become empathetic and are now selling smaller portions like 100ml, 150ml etc. where earlier,the 250ml measurement was the minimum one could purchase.
In the house, a review of cooking methods and food choices are the new decisions that have to be made to reduce oil consumption and keep it within the house budget.
To cushion Kenyans from the full brunt of the price hike, sector players have agreed and taken a raft of urgent measures, including selling-at-cost.
There is still much that can be done especially by the government, for instance, by scrapping the three per cent RDL (Railway Development Levy) and IDF (Import Declaration Fees), review the cost of fuel and electricity amongst other possible interventions.
The writer is the KAM edible oils sub-sector chair and Golden Africa general manager.