Critical Overview:
The ongoing Russia-Ukraine conflict has caused concerns over the supply of sunflower oil, which has led to supermarkets such as Tesco, Morrisons, and Waitrose limiting sales. The Kantar monthly review of supermarket sales trends indicates that consumers have been stockpiling cooking oil, and the demand for sunflower and vegetable oil has increased significantly. The shortage of sunflower oil, which is primarily sourced from Ukraine, has resulted in a supply shock that has disrupted the export market. Consequently, this has caused a scramble for alternative vegetable oils, which are not enough to go around. This article explores the reasons behind the shortage, its implications for consumers, and the possible length of the situation.
Why are Supermarkets Rationing Cooking Oil?
The rationing of cooking oil by supermarkets, reminiscent of the pandemic’s flour, eggs, and toilet roll control measures, was implemented to ensure there were enough bottles for everyone. Kantar’s head of retail and consumer insight, Fraser McKevitt, explains that sales of all cooking oils increased by almost a fifth in the four weeks leading to 17th April. This increase in demand is due to rising prices and consumers stocking up. Sunflower and vegetable oil have experienced the most significant demand increase, with an increase of 27% and 40%, respectively.
Why is There no Sunflower Oil in the Shops?
Russia and Ukraine account for about 60% of the world’s sunflower oil production. The war has resulted in a supply shock that has disrupted exports, leaving millions of tonnes of sunflower oil earmarked for foreign buyers trapped in Ukraine. This has triggered a scramble to source alternative vegetable oils, which are insufficient. The situation is severe in the UK, which sources most of its sunflower oil from Ukraine. Before the crisis, sunflower oil accounted for about a fifth of the cooking oil market by value in UK supermarkets and 44% by volume.
What is the Knock-On Effect?
The rush to secure substitute vegetable oils for business and home use is driving up prices in global markets, which were already high due to the Covid pandemic’s crop problems and the climate crisis. Farmers in Canada had a disastrous growing season in 2021 after temperatures soared to almost 50C, leading to a scarcity of rapeseed oil, the biggest exporter of rapeseed. Additionally, there are forecasts of smaller harvests from growers in Brazil, Argentina, and Paraguay after a severe drought, which has led to high prices for soya bean oil. The South American countries account for more than 50% of the world’s supply. Moreover, Indonesia plans to ban the export of some palm oil products, which is expected to exacerbate the squeeze. Palm oil accounts for almost 60% of global vegetable oil shipments, and Indonesia accounts for about a third of all vegetable oil exports.
Conclusion:
In conclusion, the supply shock resulting from the ongoing Russia-Ukraine conflict has disrupted the global sunflower oil market, leading to a shortage of sunflower oil in the UK. The scramble to source alternative vegetable oils due to the shortage has driven up prices in global markets. Furthermore, the ban on some palm oil products by Indonesia is expected to exacerbate the squeeze on the vegetable oil market. These factors have led to rationing by supermarkets to ensure that there are enough bottles for everyone, reminiscent of the pandemic’s control measures. The situation’s length remains uncertain, and it is crucial to continue monitoring the situation’s developments.
