A global food crisis precipitated by Russia’s invasion of Ukraine worsened as Indonesia tightened export restrictions on palm oil, joining a growing list of key producing countries aiming to keep essential food supplies within their borders.
The conflict in Ukraine has put global grain output, edible oil supplies, and fertiliser exports in jeopardy, driving basic commodity prices soaring and mimicking the energy market crisis.
Palm oil is the most frequently used vegetable oil in the world, and it is used to make a variety of items such as biscuits, margarine, laundry detergents, and chocolate. This year, palm oil prices have increased by more than 50%.
The export restrictions, according to Indonesia’s Trade Minister Muhammad Lufti, are intended to keep cooking oil costs in the country affordable for consumers.
The increase in pricing comes at a time when food affordability is a key issue as nations recover from the coronavirus crisis, and it is also contributing to a global spike in inflation.
Russia and Ukraine are also significant producers of edible oils, accounting for roughly 30% of global wheat exports.
Ukraine stated on Wednesday that it would ban a wide range of agricultural exports until the end of the year, including barley, sugar, and meat.
The violence has not only hindered exports from the Black Sea region, but it is also jeopardising harvest hopes as fertiliser prices rise and supplies dwindle due to a steep increase in the cost of natural gas, a major component in many products’ manufacturing process.
According to the United Nations Food and Agriculture Organization, world food prices reached a new high in February, rising 20.7 percent year on year, while many markets have continued to rise this month.
Following Indonesia’s statement, Malaysian palm oil futures hit an all-time high, while soybean oil prices hit a 14-year high.
Soybean oil prices have increased by over 40% this year.
Customers such as India are scrambling to acquire supply of alternatives such as palm oil and soyoil because Russia and Ukraine are both big producers of sunflower oil, accounting for over 80% of global exports.
Wheat futures in Chicago have risen by nearly 60% so far this year, threatening to hike the price of major food staples like bread.
The loss of two major exporters in Ukraine and Russia has been exacerbated by reports that the wheat harvest in the world’s top producer, China, is in “worst-ever” condition, according to the country’s agriculture minister.
Serbia said on Wednesday that, as of Thursday, it will prohibit the export of wheat, corn, flour, and cooking oil, citing price rises, while Hungary prohibited all grain exports last week.
Bulgaria has also stated that it will enhance its grain stocks and may impose export restrictions until planned purchases are completed.
Grain supplies in Romania, a key exporter, have tightened as foreign customers seek alternatives to Russian or Ukrainian supply, while no plans to restrict shipments are currently in place.
Following a spike in natural gas costs, fertiliser production, which helps to boost crop yields, may be reduced, resulting in a drop in global grain production.
On Wednesday, Yara (YAR.OL), one of the world’s major fertiliser producers, announced a reduction in ammonia and urea output in Italy and France.
Last week, a Norwegian firm warned that the fighting was jeopardising world food supply.
Russia had been a key supplier of fertilisers, but the country’s commerce and industry ministry urged on Friday that companies temporarily suspend exports. Russia describes its activities in Ukraine a “special operation” rather than an invasion.