Cooking oil prices triple while palm oil costs rise 33 percent

economy

Cooking oil prices triple while palm oil costs rise 33 percent


Crude palm oil prices have risen by 33 percent due to the Ukraine crisis. FILE PHOTO | NMG

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Summary

  • Edible oil makers are now buying palm oil, the main raw material, for between $1,760 (Shh 200,534) and $1,980 (Shh 225,522) a tonne following the escalation of conflicts between Ukraine and Russia last month.
  • Before the conflict, the commodity retailed at $1,490 (Shh 168,578) a tonne, having more than doubled from $700 a tonne before the pandemic hit in March 2020.
  • Now a liter of cooking oil costs twice as much as gasoline and another round of hikes will hurt consumers.

Crude palm oil prices have risen 33 percent on the Ukraine crisis as industry players scramble to urge the government to curb further increases in cooking oils.

Edible oil makers are now buying palm oil, the main raw material, for between $1,760 (Shh 200,534) and $1,980 (Shh 225,522) a tonne following the escalation of conflicts between Ukraine and Russia last month.

Before the conflict, the commodity retailed at $1,490 (Shh 168,578) a tonne, having more than doubled from $700 a tonne before the pandemic hit in March 2020.

The price jump driven by the pandemic was attributed to export restrictions in Indonesia.

“Locally, Covid-related factors had already seen the price of a 20 liter jerrycan jump from Sh2,200 to Sh4,500 in less than two years. After the invasion, the price rose to Sh5,100 in less than a week,” said Abdulghani Alwojih, chairman of the edible oils sub-sector.

“This increase is expected to have an upward ripple effect in the prices of staples and food companies.”

Now a liter of cooking oil costs twice as much as gasoline and another round of hikes will hurt consumers.

Firms say the price hike has led to an increase in demand for solid fat, which is cheaper than liquid oils.

They are calling for the abolition of the 3 percent Railway Development Fee (RDL) and Import Declaration Fee (IDF) to cushion consumers from further straining their budgets and prevent a surge in repackaged foods such as bread and groceries in restaurants.

“In order to protect Kenyans from the full brunt of the price surge, industry players have agreed and taken a number of urgent measures, including selling at cost,” Mr Alwojih added.

“There is still a lot that can be done particularly by the government, for example by removing the 3 percent RDL and IDF; Check fuel and electricity costs, among other possible interventions.”

Kenya is a major importer of vegetable oils such as sunflower oil, soybean, corn oil and commonly used crude palm oil, mainly from Malaysia and Indonesia, which produce more than 90 percent of the world’s supplies.

Cooking oil is also bought in bulk for industrial use in the manufacture of detergents and foods such as bread.

Weak production in Malaysia over the past six months due to labor shortages combined with flooding has left Kenya dependent on Indonesian palm oil.

Soybean oil supplies were impacted by the two-year drought in Argentina and Brazil caused by La Nina.

Ukraine, which accounts for 76 percent of world sunflower oil exports, has scaled back supplies.

The disruption to supplies of alternative oils — sunflower and soybean — has fueled a rally in palm oil from Indonesia.

As a result, Indonesia is enforcing a 20 percent holdback on all planned oil exports to be sold on domestic markets to control their prices, affecting import volumes to Kenya.

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