Prices of cooking oil, soft commodities skyrocket amid Russia-Ukraine conflict

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The price of cooking oil has shot up by over 20% in 2022, in some instances by more than that, depending on where you do your shopping, as with many soft commodities, upward inflationary pressures have been impacted by the Russia/Ukraine conflict.

The two countries account for a significant portion of the global output of sunflower oil, a soft commodity and the cooking oil preferred by the majority of South African households.

According to the Corporate Finance Institution (CFI) Soft commodities are “products that must be grown and cared for, such as agricultural produce, livestock, and related primary products…”

The last consumer price inflation print released by StatsSA for February 2022 showed that the average prices of the oils and fats category rose by 22.7%, on a year-on-year basis.

A significant increase relative to the overall inflation print of 5.7% for February was exacerbated by the Russia / Ukraine conflict that has tightened the global sunflower seed and oil market.

Consumers can expect two litres of sunflower oil to cost up to R120:

Sunflower oil prices

Economist at Grain SA Corne Louw says, “Because they are such big players in the world market, it does influence our prices severely and that’s the scary thing. Prices are increasing sharply internationally and that obviously affects our food inflation and, in this case, sunflower oil prices.”

An underlying driver for higher inflation more broadly remains the fuel price and that’s hitting farmers and raising their costs of production.

Louw says, “Fuel prices have increased significantly and remember everything we produce ourselves, but also for imports has a very large transport component and transport is affected by the fuel price and one must remember that that has also had a massive effect on what happens to our food prices in the end.”

One saving grace for South Africa is that the forthcoming local Sunflower crop harvest is expected to be a bumper one. However, the country remains a net importer of the crop and therefore will have to accept the prices of oils determined in the global market.

“We have a very good sunflower crop currently, so the crops estimate committee expects a crop larger than 950 thousand tonnes, so that’s the biggest crop we’ve seen in a while, so we’re very fortunate about that. The concern I have is not the availability. I think we would have enough sunflower oil available, but the concern is the price,” says Louw.

She adds that food security is not necessarily about supply, but the relative affordability of what’s on offer and says underlying drivers like the fuel price will see general price pressures across a number of food groups.

Policymakers will need to keep an eye on these developments, especially as the poor will be the ones most affected, with hunger levels set to increase.

Small business owners feeling the pinch as cooking oil prices escalate