Edible oil prices have been on a strong uptrend in the past few weeks, breaking above the psychological RM2,500MT level. This is despite the fact that demand has been relatively weak of late.
One of the main reasons for this is the ongoing Ukraine-Russia war. Russia has imposed sanctions against Ukraine and this has affected around 4% of the global palm oil supply which comes from Ukraine.
The Ukraine-Russia conflict is related to the unrest in Crimea, an autonomous republic within Ukraine. The Ukrainian government wants to turn the country towards the West whereas Russia would like to see it part of its territory or at least under its influence.
This conflict could potentially cause a shortage in palm oil supply and continue to push up prices for edible oils such as palm oil, soya bean oil, and sunflower oil.
Edible oil is an important part of our daily diet and its demand is increasing as the population of India is growing at a rapid pace. However, the prices of edible oil have been witnessing a sharp increase in the past few months after the Russia and Ukraine conflict.
The impact of Russian sanctions on Ukraine has been felt by the global edible oil industry and it will continue to do so in the coming months. The agri-commodity markets are already feeling the pinch with prices of palm oil, soya bean, and other vegetable oils rising to new highs.
The price of palm oil has risen by around 15 percent since November 2021 and soya bean oil has also seen a similar increase in its prices during this period.
How The Conflict Between Ukraine And Russia Has Impacted Edible Oil Prices
The decision by Russia to invade Ukraine earlier this year has caused a major shift in global edible oil markets. A recent article in Business Week notes how the conflict between these two countries has impacted vegetable oil prices:
The main way Russia has been affected is through its agricultural sector, which has been hit by a ban on food imports from countries that imposed sanctions against it for its annexation of Crimea.
Russia was one of the largest importers of palm oil, and it was also a big importer of sunflower oil, buying more than 1 million tons annually.
That has pushed up world prices for edible oil at a time when global stockpiles are near their lowest level in six years. The palm oil price is up 10 percent over the past six months.
Edible oil prices may increase in India
The Russia-Ukraine war could push up edible oil prices in India. In the wake of the Ukraine crisis, India’s edible oil imports from Russia will be affected. But the overall impact is likely to be contained as India has been diversifying its imports.
According to industry sources, India imports about 2 lakh tonnes of sunflower oil and about 1 lakh tonnes of soyabean oil annually from Russia. Besides, a small quantity of palm oil and rapeseed oil is also imported from that country.
Edible oils are imported mainly from Malaysia and Indonesia, which account for about 40 percent each of total annual imports. Other countries supplying edible oil to India include Argentina, Ukraine, and Brazil.