Russia-Ukraine Conflict: India At Risk As Soaring Edible Oil Rates Threaten Surging Food Inflation

Ukraine and Russia, which are major the suppliers of wheat, corn, and barley, ship more than 75 per cent of global exports of sunflower oil, one of the world’s four leading edible oils

New Delhi: Edible oil prices, used in products like chocolate to margarine and instant noodles, are on the rise. This means consumers need to shell out more. From crude oil to edible oils, commodities have been hit hard due to the Russia-Ukraine conflict and the strict Western sanctions that ensued.

According to a report in the Bloomberg, ports in Ukraine are closed, transport and logistics are severed, and buyers are unwilling, or unable, to pay the surging costs of insurance and freight required to secure cargoes from the Black Sea.

Ukraine and Russia, which are major the suppliers of wheat, corn, and barley, ship more than 75 per cent of global exports of sunflower oil, one of the world’s four leading edible oils. That’s made a tight global market even tighter and sent prices of palm and soybean oil, the two most used oils, to record highs.

Anilkumar Bagani, head of research at Sunvin Group, a Mumbai-based edible oils broker and consultant, said, “Sunflower oil exports from the Black Sea are at a standstill and crush operations in Ukraine are shutting down. This is creating a big void in global vegetable oils supplies.” That void won’t be filled so easily as other oilseed and edible oils suppliers grapple with their own problems. Drought cut the canola crop in Canada last year, and reduced the soybean harvests in Brazil and Argentina. Malaysia is suffering from a chronic shortage of plantation workers, while Indonesia has restricted palm oil exports to secure its own domestic supplies.

As a result, prices of the four major oils, palm -- soybean, rapeseed, and sunflower -- have soared, and the rally is set to cascade down to customers in the form of higher costs for everything from candy to shampoo at local stores.

Rates of palm oil, which makes up about a third of global supply, have more than doubled since the middle of June 2021, while soybean oil is up 50 per cent. Sunflower oil from the Ukraine is also up 50 per cent, according to prices from UkrAgroConsult, the last of which was dated February 24, the day of the Russian invasion. And so too is rapeseed oil.

With no sign of the conflict easing, buyers are racing for supplies. China, one of the largest consumers of edible oil, has issued orders to prioritise commodity security, and directed state-owned buyers to scour markets for raw materials. The country is also selling state reserves of edible oil and soybeans on the domestic market to cool prices.

India, the top importer of edible oils, is also at risk. The country imports about 60 per cent of its cooking oil needs and consumer food prices have risen at the fastest pace in 14 months.

 According to a report last week, as crude oil prices have hit $105 a barrel following Russian invasion in Ukraine, rates of edible oil in India now likely to go up, as 3,80,000 tonnes of sunflower oil shipments from the Black sea region to the country are stuck at several ports.

There’s also a risk that the supply crunch will prompt more oil producing nations to limit exports to safeguard their own food security and control inflation.

Khor Yu Leng, a regional economist at Segi Enam Advisors, a consultancy firm, said, “Consumers have to face heightened prices and possibly more supply issues."