Global Palm Oil Prices Hit A 6 Week High On Fears Of Short Supply

Malaysian palm oil futures jumped more than 6 percent to above MYR 6,700 per ton, the highest in over 6 weeks and approaching a record high of MYR 7268 hit on March 9th, after Indonesia announced that it might ban shipments of cooking oil and its raw material starting April 28th to bring down domestic prices.

Indonesia accounts for almost 60 percent of the global palm oil supply. The ban threatens to further stoke global food inflation, which has been accelerating since the war erupted in Ukraine.

Many countries including Kenya, depend on Palm oil as an alternative to the costly soybean and sunflower oil. Most of Kenya’s palm oil comes from Indonesia, where the two islands of Borneo and Sumatra, some of the world’s biggest palm oil suppliers, are. Malaysia is the second biggest market for Kenya’s palm oil.

Kenya also imports its palm oil from Cambodia, Thailand, China, and India, taking up close to 60 billion shillings worth of the country’s foreign exchange reserves annually.

Since palm oil is the main ingredient used to produce cooking oil, and more than 80 percent of the vegetable oil consumed in the country is imported, the increase in the global prices of the commodity has further injured the local prices.

Crude palm oil, which makes virtually all of the country’s imports at 93 percent, has significantly affected the local market. The commodity has gone above USD 130 a barrel in the global market.

According to the Kenya Association of Manufacturers (KAM), the prices of edible oils have increased in recent months due to an increase in the price of crude palm oil in the global market.

This has reduced local manufacturers’ competitiveness, thus eating into their local and global markets. It has also increased the cost of living, primarily because edible oils are a household necessity.

The prices of cooking oil have jumped by almost 33 percent Since March 2022 in Kenya, making it the country’s most expensive essential commodity.

In major shopping outlets, a liter of Fresh Fri and Avena cooking oil now sells at 350 shillings and 385 shillings, respectively. A 5 liter and 10 liters of the same commodities are going for 1700 shillings and 3400 shillings, respectively.

As retailers continue to hope that customers will pass by and pick at least a liter of the commodity, Kenyan Kitchens now have resorted to doing with less cooking oil for every meal.

Customers now opt for salad oil that comes in barrels and is sub-divided into smaller quantities at the shop. The customers carry their containers for the quarter, half, a full liter of cooking oil they wish to buy.

But even this is no longer affordable for many, and they are already seeking alternatives such as cooking fat.

As much as they have also gone up, the prices are still cheaper than the cooking oil. For instance, a 10-kilo carton of cooking fat, the solid yellow one, now retails from 1800 shillings up from 1150 shillings.