Djeneba Belem’s fried bean cake stall in Abidjan is a world away from the war raging in Ukraine. But her business is now at the mercy of an unexpected consequence: runaway palm oil prices.
“I didn’t even want to sell anymore because I thought, if the price of oil had gone up that much, what am I going to earn?” she said as she stirred a batch of cakes at her street-side stall in Ivory Coast’s lagoon-side commercial capital.
Neither Russia nor Ukraine produces palm oil, a tropical commodity, but Moscow’s invasion has triggered knock-on effects across the interconnected global economy.
The conflict has propelled prices for palm oil which accounts for nearly 60% of global vegetable oil shipments and is ubiquitous in African dishes – from Nigerian jollof rice, Ivorian sticky alloco plantains to its use in cakes and frying fats – and in cosmetics and cleaning products to record highs that experts say will deepen a food crisis and punish the poorest.
Global edible oil consumers have no option but to pay top dollar for supplies after Indonesia’s surprise palm oil export ban forced buyers to seek alternatives, already in short supply due to adverse weather and Russia’s invasion of Ukraine.
The move by the world’s biggest palm oil producer to ban exports from Thursday will lift prices of all major edible oils including palm oil, soy oil, sunflower oil and rapeseed oil, industry watchers predict.
In sub-Saharan Africa, food expenses already account for 40% of households’ consumer spending, the highest proportion of any region in the world, and more than double the 17% spent on food in advanced economies. And as prices rise across the board, including fuel, the tens of millions of Africans already pushed into poverty by Covid-19, spiking palm oil prices will be forced to make tough choices.
Even before the outbreak of fighting in Ukraine, inflation had become a global concern. Food commodity prices climbed over 23% last year, the fastest pace in more than a decade, according to the UN Food and Agriculture Organization (FAO). Cooking oils have been among the products hardest hit.
Drought decimated soy oil exports from Argentina and rapeseed production in Canada. Poor weather in Indonesia and Covid-related immigration restrictions in Malaysia throttled palm oil output and caused labour shortages on plantations.
The bright spot was sunflower oil. Then Russia sent its military into Ukraine in February, disrupting shipments from the Black Sea region, which accounts for 60% of sunflower production and over three-quarters of exports, and wiping out a huge share of global supply.
“You almost couldn’t make it up how bad it’s been,” Fry added. “We have had really almost a perfect storm.” The choice of palm oil has been an economic one for many poor countries, given it has been the cheapest of the major vegetable oils.
Lately, World Bank data show it’s been catching up to rivals, particularly soy and sunflower oil. Africa consumes more palm oil than it produces.
African nations imported nearly 8 million tons of palm oil in 2020, according to the FAO, the latest year for which data is available. Nigeria, the continent’s biggest importer, shipped in more 1.2 million tons of palm oil.
Kenya brought in nearly $830 million worth. However, the demand may also present some opportunities on the continent. Nearly two dozen African countries grow oil palm on almost 6 million hectares of land, and the sector is a major agricultural sector employer of workers who stand to see their incomes rise.