PROJECTION

Cooking oil prices to ease from end July, manufacturers hint

This is on falling palm oil costs in the global market.

In Summary

•The benchmark futures have since fallen more than 30 per cent from their peak in June on account of rising Indonesian domestic and export availabilities.

•Recession fears in the country have triggered an aggressive crude palm oil selling , leading to the price drop, traders say.

Brands of cooking oil in a Nairobi retail store/MARTIN MWITA
Brands of cooking oil in a Nairobi retail store/MARTIN MWITA

Cooking oil prices could ease towards the end of July, local manufacturers have hinted amid a correction in the prices of crude and palm oil in the global market.

The benchmark futures have since fallen more than 30 per cent from their peak in June on account of rising Indonesian domestic and export availabilities.

Recession fears in the country have triggered an aggressive crude palm oil selling , leading to the price drop, traders say.

Crude palm prices have dropped from an average $2,100 (Sh247,842) per tonne in June to $982.39 (Sh115,941 ) last week. Yesterday, a tonne was quoted at $892.05 (Sh 105, 279).

Indonesia is the global leader in palm oil exports, a key input in manufacturing of cooking oil.

Malaysia's benchmark palm oil prices are also expected to ease at the end of this month, signaling cheaper products if importers and manufacturers move to pass the benefits to consumers.

The Malysian Palm Oil Board is expected to meet next week Tuesday with major determination forseen that could influence price and exports.

“Yes the price is going down significantly….One week to two weeks process must reflect in in Kenya,” an official within the country’s manufacturing industry lobby-Kenya Association of Manufacturers told the Star yesterday.

The Kenya National Bureau of Statistics (KNBS) data indicated a litre of cooking oil had increased to Sh387.98 in June, a 51.7 per cent compared to Sh225.83 same month last year.

A spot check by the Star noted some brands are currently selling at as much as Sh411 per litre in the local retail space.

Palm oil is also used in making products such as soaps, biscuits and noodles, meaning Fast Moving Consumer Goods (FMCG) could also record a price reduction.

In its inflation data for June, KNBS quotes am 800 grammes bar soap at Sh160.09, a 30 per cent increase compared top Sh123.11 in June last year.

Prices of detergent have also increased 19 per cent according to KNBS, with a 500 grammes product averaging 198.06, up from Sh165.59.

In June, the country’s cost of living(inflation) hit a two-year high of 7.9 per cent.

"Inflation was mainly due to increase in prices of commodities under food and non-alcoholic beverages (13.8 per cent); furnishings, household equipment and routine household maintenance (9.2 per cent)," KNBS director general McDonald Obudho said in a statement.

Transport costs increased 7.1 per cent and housing, water, electricity, gas and other fuels (6.8 per cent) between June 2021 and June 2022.

Prices of wheat flour-white, carrots and cooking oil (salad) increased by 12.7, 4.7 and 4.7 per cent in June 2022, respectively.

The Kenya Association of Manufacturers (KAM) however maintains that prices are subject to prevailing costs of raw materials, transport and logistics among other factors affecting the cost of production.

Effects of the covid-19 pandemic, the Russian - Ukraine crisis and the petroleum crisis have also been blamed for driving up costs.

The weakening of almost all currencies against the major international global currencies like the US dollar is also a major factor as it makes imports more expensive.

Consumers in Kenya have had to contemplate with rising commodity prices with cooking oil being among the most hit in recent months.

However, this could change, manufacturers say with the impact in price correction projected to be felt within the next two weeks.

Nevertheless, gains may be eroded by the strengthening US dollar against the local currency.

The Retail Traders Association of Kenya (RETRAK), the retail sector lobby group, have also defended the rising commodity prices.

“Buying price from the manufacturers has risen dramatically due to what we are told are increased costs of manufacturing. Retailers’ margins have decreased due to their attempt to maintain prices,” CEO Wambui Mbarire told the Star.

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