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.”