Cooking oil has become the star of price increases.

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The latest data available from the National Institute of Statistics (INS) show that edible oils have seen a price increase of almost 26% in the last 12 months, data available for January 2022. However, although the official data will be presented only in a few days , anyone who has visited the stores in the last month has noticed an explosion in the prices of this product. And analysts’ forecasts are not at all optimistic: Russia’s war on Ukraine could create the conditions for a “perfect storm” to hit the market.

About 60 percent of the Black Sea region’s exports of sunflower oil are delayed this season due to Russia’s invasion of Ukraine, according to James Fry, president of LMC International, for Bloomberg.

Moreover, the establishment of the new sunflower and corn crops, which should take place soon, will be difficult and will not be enough in Ukraine and Russia, says Fry.

Just one month ago, the consulting firm estimated that exports of sunflower oil from the Black Sea basin would increase by more than 2 million tons in the 2021-2022 agricultural season to 13.5 million tons. The question is how much of this prediction will be shattered by the war, but the answer is still a mystery.

“Stocks and exports of cooking oil are also falling. The pantry is empty. The only alternative is to let high prices rationalize demand and balance the market, “said James Fry.

For the time being, the rationalization of demand in some parts of Europe is done by setting maximum thresholds of quantities that can be bought in stores. Such a restriction was introduced in Spain on Tuesday.

“Due to the situation in Ukraine, there are some problems with the supply of sunflower oil. For this reason, purchases are limited to three one-liter bottles or one five-liter bottle per customer per day. We apologize, ”reads a billboard displayed in several supermarkets in Madrid, operated by the El Corte Inglés chain.

Mercadona, Spain’s largest supermarket chain, also limits purchases to five liters per customer, according to information posted on the company’s website.

Such restrictions have been introduced as a result of the “unusual behavior of customers” who are in a hurry to buy sunflower oil, which has created an “abnormal” level of demand, according to a statement from ASEDAS, which represents supermarkets and food distributors in Spain.

60% of sunflower oil on the Spanish market comes from exports from Ukraine, according to data published by El Mundo.

On the other hand, the behavior of Spanish consumers seems to be irrational and is criticized by industry voices, even on condition of anonymity:

“The fear that we will run out of sunflower oil is completely absurd, as long as Spain is the world’s largest producer of olive oil. The Spanish consumer will be the least affected by this whole story. In other words, Spain can double its production on certain product segments that today come from imports because they are simply cheaper that way. However, Spain is not the United Kingdom, which buys everything because it does not produce much. “

Romania, one of the leaders in European sunflower production. Does it help anything?

In a press release on Tuesday, FEDIOL, the European association of the vegetable oil and protein flour industry, pointed out that the war in Ukraine has serious consequences for the European supply of sunflower oil. A monthly amount of 200,000 tonnes has ceased to be delivered to European ports, and member companies are already assessing the short- and longer-term consequences, the association said.

“It is estimated that the available stocks of sunflower oil in the EU will last between 4 and 6 weeks. Beyond this period, the lack of availability of crude sunflower seed oil and limited alternatives is likely to lead to a shortage of refined / bottled sunflower seed oil on the European market, and the lack of availability will be felt by the end consumer. ” , is shown in the organization’s statement.

Regarding the solutions and backup options, FEDIOL notes:

“There is no immediate solution to this disruption in the sunflower seed oil market and it is unclear whether and how trade will be resumed. Depending on the market, alternative vegetable oils may come into play to some extent, such as rapeseed oil, soybean oil and tropical oils. “

Romania could play an important role in this turbulent landscape. Every year between 2016 and 2020, our country was the EU leader both in terms of area under sunflower and in terms of production and exports.

Annually, Romania cultivates an area of ​​1.2-1.3 million hectares with sunflower, and the realized production amounts to 3-3.5 million tons (except for the year 2020, when the production was diminished due to the drought , amounting to about 2.4 million tons), according to INS data.

By comparison, Ukraine and Russia produce an annual production of 14.1 million tons of sunflower seeds and 13.27 million tons of sunflower seeds, respectively, which accounts for 55% of global production. USDA data, US Department of Agriculture.

“It is possible that the areas sown with sunflowers this year will increase, because in many areas of the country there is a drought, and the wheat and rapeseed do not look good and some farmers return the wheat crop, planting sunflowers. Thus, due to the higher production, the oil factories will probably intensify the processing of sunflower seeds this year as well “, said Alina Cretu, the executive director of the Romanian Corn Producers Association (APPR), made up of several producers of corn. cereals, for Ziarul Financiar.

According to ZF data, the largest processors of oilseeds in Romania are the Americans from Bunge, with the factories from Lehliu (Călăraşi County) and Buzău, the French from Expur, with the factory from Slobozia, Prutul, with the factory from Galaţi and Ardeal, with the Carei factory (Satu Mare county). Expur has a refining capacity of 400 – 450 tons / day, Prut has a refining capacity of about 400 tons / day, Bunge has a refining capacity in the factory in Buzau of 240 tons / day, Transylvania has a refining capacity of 240 tons / day.

According to the Price Monitor, the application developed by the Competition Council with the support of major Romanian retailers, the liter of “Grandma” sunflower oil can be found on Wednesday, March 9, on the shelves of large stores with prices between about 8.5 and 10 lei.

The crisis is signaling that it will spread globally to other types of edible oils

As if that were not enough, another factor that will influence the prices of edible oils is the fact that the combined deliveries of palm oil from the Southeast Asian states will not exceed the volumes of 2020 until the third quarter of this year. year, he says. Its estimates show that Malaysian production will only increase by about 3% -4% this year due to the labor crisis, and the “real crisis” in cooking oil supply will appear in the next six months.

In addition, global soybean oil deliveries are expected to decline in the 2021-2022 agricultural season due to higher demand in exporting countries. The soybean oil market in terms of processing is also unfavorable: estimates of increasing global soybean processing capacity have been dramatically revised down to just 4.5 million tonnes from initial estimates of 16 million tonnes.

At the same time, inflation will worsen and central banks could raise interest rates to curb economic activity and limit demand for such low food and fuel supplies. Even if the main hope in the short term is an increase in exports from Indonesia, the world leader in palm oil production, there are serious doubts that this will really happen.