Costly festivities beckon as cooking oil prices surge

Friday, December 6th, 2019 00:00 |
Cooking oil prices surge.

John Otini and Agencies

The cost of living is set to surge further with cooking oil prices hardening by up to 20 per cent in the run up to Christmas festivities on tight supplies of raw materials.

Prices of palm oil have shot up by more than 25 per cent in key source markets of Malaysia and Indonesia which have passed policies increasing bio-diesel content for automotive fuels, constraining supplies.

A Kuala Lumpur-based trader told Reuters that the surge in prices towards the end of the season is due to a tight supply outlook and Indonesia’s biodiesel plans. Indonesia is the world’s largest palm oil producer.

Kenya buys Sh54 billion worth of palm oil annually, one of its largest imports after crude petroleum. Imports from Malaysia fell by 32 per cent in 10 months to October compared to the same period the previous year on supply side shocks.

Other markets

“If prices rise further I think importers will be forced to look for other markets, but African producers have very little stocks,” Bidco Group chief executive Thiagarajan Ramamurthy said.

A spot check on supermarket shelves by Business Hub indicates that prices are up by up to 20 per cent. Two litres of Rina cooking oil is going for Sh446 up from as Sh380 at Naivas Supermarkets in Nairobi.

Two litres of Top Fry is selling for Sh339 at Carrefour up from Sh300 in the last six months.

Kenya imported 133,000 tonnes from Malaysia down from 198,000 tonnes of palm oil in the period under review.

Malaysia and Indonesia are likely to increase the biodiesel content in motor fuels to 30 from 20 per cent and from 10 to 20 per cent , respectively from January.

Traders expect prices to move northward in the New Year. Palm oil price is expected to firm up by another $50 (Sh 5,082.50) per tonne from the current level within the next three months. This means that palm oil will become dearer. 

Crop damage

Also crop damage due to heavy rains across Indonesia has pushed up prices of edible oils in the past few weeks.

China has bought significant volumes of palm oil ahead of the Chinese New Year. This, too, has firmed up prices. The Chinese new year starts on January 25.

Officials yesterday said the implementation of the country’s plan for biodiesel to contain 30 per cent palm-based fuel is expected to reduce fossil diesel fuel consumption by 165,000 bpd.

Kenya also makes cooking oil from sunflower, corn, macadamia and other seeds but most of the oil comes from palm oil.

Data from the US department of Agriculture shows that Kenya’s imports have been rising almost exponentially since 1964 and the graph has been taking on a vertical dimension lately. This means there is more room for oil production to meet demand.

The growing of palm trees has had a negative effect on the environment and source countries are now setting their eyes on Africa as their next source of oil.

It is reported that a third of all mammal species in Indonesia are considered to be critically endangered due to unsustainable growing of palm trees

In Africa, palm oil is produced in Central African Republic, Cote d’Ivoire, Cameroon, Democratic Republic of Congo, Sierra Leone, Ghana, and Liberia, Nigeria, Gabon and Congo.

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