05 March 2013/22 Raby’ ath-Thani 1434/15 Esfand 1391

Cooking oil prices just keep going up at the grocery store.  I remember when I could get a gallon of vegetable oil at Walmart for around $1.00 USD,  now it’s close to six bucks per gallon (last time I checked, I still have a little bit-o-that last gallon I bought for a buck, I been using butter cause it tastes better and it’s cheaper where I get it).

Reasons for cooking oil prices going up range from individual countries imposing and increasing import taxes on vegetable oil, to wars, to crime, to supply/distribution issues, to it being used to make fuel for vehicles and problems (like drought) growing the crops used to make it.

Of course, any war torn country sees skyrocketing prices in the basic necessities, like cooking oil.

Interestingly I’ve seen recent conflicting reports concerning India.  Some reports say the price will come down as demand has dropped (due to it being expensive), yet other reports say the price will go up because India is increasing their import tax on foreign made cooking oil (in the name of protectionism).

In the Indian state of Himachal Pradesh, cooking oil is now part of the state government’s welfare program for low income people.

In Malaysia, palm oil prices are up. In the last week prices fell on rumors that soy oil (currently the cheapest form of cooking oil) yields from China and the Americas would be so large that palm oil couldn’t compete.  Now prices of palm oil are up on predictions that supply will fall. However, there’s also the chance that demand will fall as the Malaysian government has imposed an export tax on their own cooking oil product. Oh the joys of western capitalist commodity markets!

China is buying up soybeans from South America. Apparently China now has enough bean crushing facilities that it can crush the entire soybean crop from Argentina! Last year China crushed 61 million metric tons of soy, which is less than half what it could have handled.

Right now, China takes in about 76% of Latin America’s soybeans.  China also buys up 60% of soybeans made in U.S.A. That’s because soy grown in the Americas was (was is the key word) actually cheaper than soy grown in China. But demand keeps going up, and now reports of supply going down despite increased production.

The latest reports out of Brazil, the largest South American producer of soy, say that transportation issues are resulting in delays getting soy products shipped out. Brazil was expected to beat out the United States as top exporter in 2013, but not now. Analysts say the transportation problems in Brazil are causing demand for U.S. soy to go up, thus causing U.S. soy prices to go up.

The bad economy in Spain has hit the olive oil industry hard. The latest reports say olive oil production has dropped 60%!  Part of that reason is due to cheaper olive oil flooding into the Iberian country: “Boatloads of olive oil keep arriving from Tunisia, and the rain of the last two months has been very good for the land, auguring well for a recovery in terms of better olive flowering in May.”-Olimerica magazine

Another reason olive oil production is down in Spain is that the olives are being shipped out to India. The South Asian country consumed $2 million USD worth of Spanish olives in 2012. This is part of the reason that global demand for the oil producing olive is way up, up so high it might be outpacing the increased global production, which results in higher prices.

According to Olive Oil Times exports of olive oil to China and Japan are up 38% so far this year. Australia has increased olive oil imports by 32%.  Russia by 19%.  Also, for the months of October and November 2012 “…the US imported 53,625 tons, Brazil 14,996 tons, Japan 8,468 tons, Canada 7,447 tons, Australia 7,379 tons, China 7,270 tons, and Russia 7,035 tons.”

Now enter the con-artists. Olive oil has become such a profit maker that sellers are ripping consumers off with fake olive oils and even repackaging to sell cheaper olive oils as more expensive brands: “The olive oil sector is being subjected to a dangerous scheme, whereby traders make huge profits re-exporting imported olive oil after labeling it as Lebanese.”-George al-Aynati, Koura Olive Farmers Association

In Namibia, on the African continent, farmers say the drought is so bad they can not grow anything.  Emergency supplies of corn (maize) are running out.  Corn is used to make cooking oil.

U.S. corn prices are up. This is because of limited domestic supplies due to a combination of drought and increasing exports to other countries.

A report out of Canada says canola was the top money making crop for Canuck farmers in 2012.  However, the latest reports say canola prices are dropping, due to an expected decrease in demand from China, caused by a slow down in the East Asian country’s economy.

A report out of Colorado U.S.A., says more farmers are turning some of their canola oil crops into fuel for use in their farm equipment. This is after a bad year in which crop yields were down.

Rapeseed prices are going up and Canada’s Farm Ministry blames increased demand from China (despite their economic slow down?), with the result being short supply for Canadians: “Consequently, with availabilities likely to remain thin in Canada, and limited capacity in other suppliers to lift exports to meet any potential expansion of global demand, fundamental tightness could provide sustained market support in 2013-14.”

In Australia, export analysts are blaming the increasing value of the Aussie dollar for making Australian agriculture products more expensive for foreign buyers.

In Japan, the country’s number two cooking oil maker, Nisshin Oillio, said they will have to raise prices as much as 15%.  They blame rising prices of basic  commodities and the falling value of the yen (which makes it more expensive to buy foreign supplies).  Other food suppliers said the same, and consumers are expected to see the higher prices in their local grocery stores by April.

The increasing price of fresh grown oil crops has alternative fuel makers going after used cooking oil. But that’s creating a new problem.

In Atlanta (Sandy Springs area), Georgia U.S.A., people have been caught trying to steal used cooking oil from local restaurants! Police say the used oil is sold by restaurant owners to alternative fuel (bio-diesel) makers, and desperate people are trying to cash in by stealing it.  The most recent case involved a woman who got away with $100 worth of used coking oil.

The Philippine Department of Energy, and Department of Environment and Natural Resources, just announced a new program to use waste oil (to include used cooking oil) to make fuel. It involves a major fast food company called Jollibee.

Apparently Warren Buffett wants to jump on the money making cooking oil band wagon. According to the latest reports, Buffett’s current five faves for stock investments involve Archer-Daniels Midland Company, which is involved with cooking oil and food commodities trading. He also likes Kraft Foods, a major user of cooking oil (like in their mayo, Miracle Whip and salad dressings).

In the long run we consumers could see lower prices, as more farmers in the Americas are jumping on the cooking oil crop craze, to try and make some profits.  And, many eastern hemisphere countries are focusing on increasing their own cooking oil crops (like China and India), to try and counter the rising prices.  Analysts say this will result in a future glut of crops for cooking oil, which should, hopefully for consumers, bring prices down.