Cooking Oil Price Surge Could Cause Riots, Snickers Shortages

Food producers are starting to run low on soybean and palm oil, amid demand from developing countries like China and India. According to Bloomberg, companies such as Nestle and Unilever, which use oil in everything from mayonnaise to Snickers, will see oil inventories fall by 12% this year. Food prices spiked in September to levels not seen since 2008, when high prices and shortages caused riots in Egypt, Haiti and elsewhere.

As Bloomberg reports:

Increasing wealth in Brazil, India and China is boosting demand for grains, dairy, meat and cooking oils. While Sime Darby Bhd., the world’s biggest listed palm-oil producer, is benefiting from rising prices, governments from Beijing to New Delhi are trying to curb food inflation by raising imports, limiting exports or selling stockpiles. Per-capita use of vegetable oils in China has more than doubled in a decade, said Bill Nelson, a senior economist at Doane Advisory Services Co., an agricultural research and advisory company in St. Louis.

Demand for biofuels such as ethanol, along with hotter temperatures and water scarcity, are exacerbating cooking oil shortages, according to Bloomberg.

“The critical period of tightness is yet to come,” said Dorab Mistry, a director at Godrej International Ltd. “We’re not doing enough to raise production of vegetable oils and the weather the world over is troublesome.”

Food Inflation Accelerating as Cooking Oil Poised to Catch Grains [Bloomberg]

Comments

Edit Your Comment

  1. pecan 3.14159265 says:

    Blah blah oil shortage blah blah China blah blah biofuels.

    …the only thing I took away from this was that we need to stockpile Snickers.

  2. StuffThingsObjects says:

    Make a movie: Fryday – The Day We All Got Skinny.

  3. SilverBlade2k says:

    I don’t see this as a bad thing. If the prices of junk food like chips and chocolate bars increase because of this, it’ll become less affordable to buy junk food.

    Win-win for everybody.

    • Alvis says:

      What about people who like “junk” food?

      • StuffThingsObjects says:

        That’s the entire point of an economy. You value one thing so you trade something that the other party views as an equal value in order to obtain it. If you value the money more than the object, then the greater value will win over the lesser value. Do you value junk food enough to consider the price raise as depriving you of that value?

    • pop top says:

      Except for the poor people who can only afford foods with fatty oils in them. But they don’t count right?

      • obits3 says:

        “can only afford …”

        I call BS on that. When I was in college I lived on about $11/Day for food and gas. I went to Walmart and bought cheap semi healthy things like deli meat, various breads, peanut butter (which would last forever!), and pizza. The margin on junk food (for what it is) is way too high. You don’t need M&M’s & Coke to live. I also loved having a dinner of ravioli and bread. I would dip the bread after finishing the ravioli to make it taste better. Not the best diet, but it is better than junk food.

        • Etoiles says:

          When I finished grad school, I lived on $20 / WEEK in food. $11 per day would have been luxury incarnate. And 5/$1 ramen sure ain’t good for you, but it’s filling.

        • shepd says:

          LOL, $11 a day is poor, NOT.

          I made $1500 a month at one point (In fact, I made less before that, but my business was just starting). Rent was about $900 a month for an absolute dump, but I was lucky that it included utilities. After taxes I probably took home about $1100. That leaves about $6.67 a day for EVERYTHING. $11 a day would be nearly double that and would definitely be luxurious if I was making enough to spend it only on food and gas. I’d estimate my food spending budget at about $2 to $3 a day. Add in $50 a month or so for the bus pass, and that left $75 for anything else you might need (Toilet paper, cleaning supplies, toothpaste, etc).

          • jason in boston says:

            I’m on the $5 / day trend myself. All it takes is a little planning.

            • colorisnteverything says:

              I live on about $7.00 a day tops and still eat really well. I bring my lunch to class/teaching and eat good things. I love my leftovers.

        • jessjj347 says:

          People who are on food stamps typically have only about $3 a day – for an entire family.

          • obits3 says:

            If they only have $3 a day, then why spend money on junk food? What I’m getting at is that junk food has a lower “Time it takes to consume/Dollars spent” ratio. For example, because it is not as sweet and more filling, bread should take longer to consume than Oreo cookies.

            P.S. my $11/day number included gas and some other things now that I’ve had a chance to look at it.

      • XianZhuXuande says:

        Things like pasta sauce, rice, chicken, potatoes, veggies—they make for a much cheaper meal than virtually any of the junk people buy at grocery stores. You could probably beat it out with things like Raman Noodles, but I have *never* seen one of these poor down-and-out families eating nothing but Raman Noodles (seems college students tend to be more interested in that route). Curiously they tend to have their soda and other goodies in their shopping cart and lining the shelves at their home.

        It certainly is possible to eat healthy for very little money.

      • BanzaiBrittany says:

        I gotta call bluff on the being poor = eating unhealthy junk myth. If you’re that poor, you most likely qualify for foodstamps and can afford healthy food. I’m on them and even after buying organic and natural foods, I have a big surplus left on my ebt card.

        • ajaxd says:

          Not sure what you buy but, for example fresh vegetables:

          tomatoes 2-3 $ a pound
          green peppers $2 a pound
          even potatoes are closing on a $1 per pound

          In the meantime you can load up on chicken parts that are sold for well under a dollar per pound, canned foods that are about $1 per can and so forth.

          Guess which stuff people buy when they have limited resources.

          • BanzaiBrittany says:

            It’s easy. Not all vegetables need to be bought fresh or even organic. Anything with a thick peel or other outer covering or that grows in the ground doesn’t need to be bought organic. So…bags of frozen veggies instead of fresh, organic/natural dry pastas and rice, cereals, almond milk, bread. Instead of sauces for pasta I usually just have olive oil and vinegar and that lasts a long time…for meat I buy the gigantic family size of chicken breasts and separate the portions and freeze them. I’ve been buying spices slowly for years, so I don’t need those too often (dollar tree carries huge containers of the “basic” ones that run out fastest). The only things I buy fresh are some fruits, and things like lettuce and cherry tomatoes. Throw in a carton of eggs and some veggie burgers and I’m good to go. I don’t snack so that’s a giant chunk of money that I don’t need to bother with. Just the no-snacking thing has cut a massive amount out of my grocery bill. It was annoying at first, but now I can’t really imagine just sitting around eating for the sake of eating. Kind of grosses me out…

          • Erik Hughes says:

            I live in downtown Seattle and while all of the large chain supermarkets have the ridiculously high prices you mention, take a little trip to your neighborhood Asian market sometime to be completely blown away by the low prices. At QFC plain old green peppers are selling for $1.69 a piece. The red ones are $2.59 each. At the Asian market, they are $.89/lb and $1.09/lb respectively. Many of them are exactly the same brand as you’d find in the big stores too. Sure, the stores aren’t as organized and you might stumble on a giant tub of fish entrails, but getting 2 weeks of fresh veggies for $30 is amazing.

        • ceriphim says:

          Someone mentioned this below, but google “Food Deserts” if you think this is BS.

          Anecdotal evidence (your situation) doesn’t address the problem.

          • Fineous K. Douchenstein says:

            Tomatoes $2-3/lb? I just got some for $1.19 on the vine.
            Potatoes? I never pay more than $0.50/lb..

            Yes, the cost of living is less down South, but if I paid those prices you say, I’d be one of the poor.

            • catnapped says:

              Then you’re one of the lucky ones…$2.99 is a 5lb bag of potatoes on sale (stores make it like they’re doing us a favor selling it that cheap)

        • Kate says:

          if you have no money, how do you afford to drive way out to the organic food store? They probably don’t have many of those in the slums.

          • kc2idf says:

            The bus does go past at least three health food stores, plus two farmers markets that I am aware of in the Capital District of New York. I can list them off for you if you want. I would expect a similar situation elsewhere.

            Additionally, not all of the poor live in the slums. Some of them live in the ‘burbs. One of them lives across the street from me, in the modestly nice part of Schenectady.

            So take your stereotypes someplace else.

        • 99 1/2 Days says:

          Not everyone takes welfare just because they are poor.

  4. Gulliver says:

    This is not just about cooking oil prices increasing. Food prices will be increasing rapidly over the next 12-24 months.

    • sixsevenco says:

      Maybe buying a year’s worth of food in advance doesn’t sound that ridiculous after all…

      http://consumerist.com/2010/04/let-costco-outfit-you-for-the-coming-apocalypse.html

    • jessjj347 says:

      IAWTC. Also, I read about bio-fuels having this affect about 3 years ago, so I’m not surprised to see the long-term increase in price for food. Basically, the adage I’ve heard goes that the food used for one tank of ethanol fuel in an SUV could feed a person for a year.

      It takes about 26.1 pounds (11.84 kg) of corn per gallon (based on quick search on Interwebs), and corn-based fuel is less efficient than gasoline-based fuel.

      Then let’s say the SUV tank holds 19 gallons. 26.1 * 19 = 495.9 pounds of corn.

  5. NashuaConsumerist says:

    If I remember correctly, much of the rain forest destruction is stemming from the creation of palm plantations to create palm oil. This doesn’t bode well for slowing that trend and this will be used as an excuse to raze that much more of our dwindling rain forests. Troubling news for reasons beyond the impending shortage…..

  6. sirwired says:

    Um, how can Nestle use cooking oil when making Snickers? Snickers is an M&M Mars product, and M&M Mars is not owned by Nestle.

  7. Jimmy60 says:

    Too much moisture around here has reduced the quality of many crops this year. As the area is a heavy grower of Canola, this might also have an effect.

  8. CaughtLooking says:

    Nestle doesn’t make Snickers – Mars does.

  9. HogwartsProfessor says:

    I read Sime Darby Bhd as SLIME Darby Bhd.

    What about olive oil?

  10. Applekid ┬──┬ ノ( ゜-゜ノ) says:

    Stock up on Alli now so you can recycle what you do get your hands on.

  11. Quake 'n' Shake says:

    Oh god… whatever happens, NO WAR FOR OIL!!!!!

  12. Big Mama Pain says:

    Yeah, everyone thought ethanol was such a great idea until farmers stopped growing regular food to make real money on growing corn and other worthless crops that can be turned into ethanol.

    • MrEvil says:

      Please stop making generalizations about agriculture when you know nothing about it. Nobody has stopped growing produce in favor of field corn. Even with the price jumps due to demand for ethanol the price still isn’t high enough to justify a carrot or tomato farmer to shift production gears, and that’s even if it were feasible for them to do so. You grow the crops that work best in your type of soil, your climate, and with the equipment you have available.

  13. PSUSkier says:

    That’s fine. Rape seed isn’t mentioned above so I’m all set on my rape oil usage.

    /Canola

  14. gman863 says:

    Per-capita use of vegetable oils in China has more than doubled in a decade, said Bill Nelson, a senior economist at Doane Advisory Services Co., an agricultural research and advisory company in St. Louis.

    Does this mean most Chiniese people will have to change their name to Tu Phat?

  15. Groanan says:

    Hmmm, today I got an add from Hammacher Schlemmer for “The Healthiest Deep Fryer” that makes “2 lbs. of crisp, succulent fried food using only one tablespoon of oil.”

    Coincidence? Or have I just exposed the criminal kingpins really behind the oil shortage?

  16. Jolyn says:

    Living in South Africa, where food is already hugely expensive in relation to incomes, this is a huge cause of concern. If coooking oil is becoming scarce, why aren;t we producing more of it? Government led farming subsidies mean we have wine lakes, butter mountains and vast overproduction of foodstuffs we don’t need, yet massive shortages of critical items we do need. Will government wake up and sort this out?

    • FrugalFreak says:

      NO because there are increased profits to be had. I’m seriously considering starting farming a small garden. If we all did, prices of food would come back down.

  17. justagigilo85 says:

    As someone who worked at a grocery store for 5+ years, that picture was a sight all too common with “people of middle eastern origin.”

    I imagine they’re all going ape shit and are now stock piling oil (and deoderant, shampoo, toothpaste, etc).

  18. crazydavythe1st says:

    I make my own vegetable oil at home?

    Actually I’d probably be using it more if I hadn’t found a place near me that sells pure unhydrogenated lard at a good price. So tasty and apparently not quite as bad for you as often believed.

    I gots me some butter, lard, and EVOO (for occasional use) so I’m either going to live forever if you believe the conspiracy theorists or I’m going to die at 30.

    ‘Course, they’ll probably find a way to raise all food prices, not just foods that are derivatives of soy or palm oil. I feel like I’m rambling. Oh well, lard is heavenly.

    • yusefyk says:

      Really I think pure lard is not bad for your health so much, because you can use less of it, and less salt or oil as well. Because the taste is stronger and better.

      Here in Malaysia we pay very extra for butter vs palm-oil “spread” however, I found that we save money overall and have better taste. Because we use much less butter than the equvalent “spread”.

      Same thing with lard I think.

  19. pot_roast says:

    “Increasing wealth in Brazil, India and China is boosting demand for grains, dairy, meat and cooking oils.”

    This is what we get for firing everyone here and handing the jobs to India & China. We have all screwed ourselves. :/

  20. MoreThanWYSIWYG says:

    I can’t wait to hear the obese wheeze and holler about having to exert that extra energy to waddle through WalMart quicker.

  21. Blueskylaw says:

    I knew my oil futures speculation would pay off big.

  22. gparlett says:

    Stories like this honestly confuse the heck out of me. The free-market has proven incredibly adept at resolving these kinds of issues. Soybean and palm oil are renewable resources. If more people want palm oil then the market will produce more palm oil. Companies will expand their palm plantations. We’ll never see a ‘shortage’. Prices will simply rise to curb demand in the short term and supplies will expand to lower prices and meet demand in the long term. It’s like the so called ‘rice shortages’ of a few years ago. There was never a time when I went to WalMart and they were sold out of rice, rice simply went up in price a few cents… What’s the big deal.

  23. webweazel says:

    My understanding of the oils is thus:
    Manufacturers use whichever type of oil that is cheapest. If you check the labels, a lot of times, the oils are listed as “and/or” so they can substitute as the market prices shift. If palm oil gets more expensive, they’ll just change to another oil which is the cheapest. I don’t see where this will become much of an issue.

  24. Darraign the Sane says:

    How can we be short on soybean oil when we are paying farmers to not farm (and even destroy crops) here in the U.S.?

    • MrEvil says:

      Paying them not to farm?

      I’m assuming you’re referring to the Conservation Reserve Program that the USDA does with farmers. That’s hardly getting paid not to farm. Those are mutli-year contracts during which you can’t do ANYTHING with the land other than restoring it to its natural un-touched state. You can’t even run cattle out on it. The program is aimed more towards maintaining habitat for native species, improving water quality, and preventing soil erosion. There are incentives for renewing your contract for longer periods as well. But it’s hardly getting paid not to farm, it’s about preventing the damage to the environment that commercial agriculture can cause.

      And you tell me just whom is getting money to actively destroy crops, because I haven’t heard anything about this and I help run a farm.

  25. RayanneGraff says:

    I can’t even remember the last time I used cooking oil. Do people really NEED to eat fried shit that bad that an oil shortage will impact our diets catastrophically?

  26. MrEvil says:

    Good news for farmers in the oil seeds market. The price on ag commodities has been depressed for far too long. If my grandfather got paid back in the 50′s for his commodities what my dad and I get today (adjusted for inflation) he’d shit bricks. My grandfather got $5/gal (in 2009 dollars) for his milk back in the 50′s. That was before the creamery tacked on their profits. Dairy farmers in 2010 don’t even get close to that.

    Contrary to popular opinion, there are lots of farmers in the US that are struggling to make a living for themselves. It was one of the reasons I closed up my business and moved to Austin. My key market was small farmers in West Texas, but many of them barely had money for a computer in the first place, let alone money for me to keep it running for them.