The Competition Commission is monitoring the spike in sunflower and other edible oil prices and will take action if retail prices are not justified by increasing costs.
Sunflower oil prices have risen sharply and some retailers are limiting customers' purchases of edible oils.
A 5 litre bottle of cooking oil costs about R177 — up from about R138 in December 2021, according to the latest household affordability index by research and advocacy organisation the Pietermaritzburg Economic Justice & Dignity Group.
Competition Commission spokesperson Siyabulela Makunga said this week that “the commission is studying or monitoring the causes for the steep increase in sunflower prices or other edible oils, and if the price is not justified by increasing costs, the commission will exercise its powers and formally investigate the responsible parties”.
“In the meantime, the commission strongly urges producers to exercise caution and not effect price increases not related to increasing costs.”
This forms part of ongoing monitoring by the commission of prices of essential foods, over the past two years.
Globally, Ukraine and Russia account for about 62% of sunflower oil exports and 30% of exports of wheat — whose price has also risen.
Woolworths said it aims to keep price increases to an “absolute minimum” but there are circumstances outside its control. “We will only accept a price adjustment as a last resort after exploring all avenues to prevent one,” it said.
The retailer said due to the Ukraine-Russia crisis, “we have seen cost impacts in oil commodities and due to stockpiling we have also limited purchases to two units per customer on sunflower and canola oil for the time being to ensure that we have sufficient stock to satisfy all customers”.
“We have sufficient stock at the moment to satisfy our current demand,” it said.
Pick n Pay declined to comment, and Spar and Shoprite did not respond to requests for comment.
Morne Botes, commercial director at Southern Oil (Soill), which owns B-Well and African Gold brands, said vegetable oil supply and demand works within a complex environment and to a large extent various edible oils can serve as alternatives for each other. But any variable affecting the supply or demand of one can affect the other.
Botes said in the 2018 to 2020 seasons there was a “very poor” yield on sunflower crops, due to weather conditions, and this led to higher prices of sunflower oil. This drove the market to the best alternative, rapeseed or canola, which in turn affected the supply and demand of those oils.
Botes said in the 2020/21 season the Canadian canola crop was very poor due to a drought that had led to record low crops in the past 10 years. Droughts in South and North America affected corn and soya crops, driving all edible oils — already under pressure — to record levels towards the end of 2021.
“Covid also had an impact, to the one extent decreasing demand for vegetable oil due to lockdowns and less consumption, but also affecting supply as in Indonesia and Malaysia the planting and harvesting of palm is a very manual process, which affected supply,” he said.
As global demand grew, Indonesia, the largest exporter of palm oil, initially limited exports of the commodity in order to secure supply and control prices for its local market.
When Russian invaded Ukraine and the country's sunflower oil was removed from the global market, supply and demand became “extremely skewed”, leading to a significant shift in pricing in a very short period, he said.
Indonesia has now implemented a complete ban on the export of all palm oils and derivatives, and Botes said this ban will lead to high prices and shortages in the short term, as alternatives are priced at higher levels.
Consumers can expect higher prices in 2023 “as the imbalance of supply and demand will not be corrected in the short term until a full crop season is seen, and this will then also be dependent on the crop yield”.
Botes said Soill has sufficient stock to service normal consumer demand.
“The risk is if consumers panic buy and demand spikes in the short term, then the crushing plant cannot produce stock fast enough to cater for the abnormal demand in the short term,” he said.
Since the start of the Ukraine war, most commodity and grain prices have risen substantially, though they have started to stabilise. Still, prices remain high compared to the beginning of the year, said Heleen Viljoen, intern economist at Grain SA.
Large parts of the world are busy planting the winter wheat crop, with some of the major exporting countries experiencing poor production conditions — and this is adding to global supply concerns, said Viljoen.
“The market is currently very volatile and any news from the conflict affects price reactions. If Ukraine will be able to harvest and export their winter wheat crop in July and August, prices might come down sharply. We also consider consumer resistance to the current wheat prices,” she said.
SA is a net importer of wheat, bringing in 1,591,653 tonnes a year on average over the last three years. So far this year, the country has imported 585,897 tonnes of wheat, mostly from Argentina, Australia, Brazil and Lithuania, said Viljoen.
Though the strong rand is said to have cushioned SA against a significant increase in wheat prices, Dawie Maree, head of information and marketing at FNB Agribusiness, said: “We are not out of the woods yet. We must take into account that we are a net importer of wheat. We don't produce enough. If the rand weakens sharply, we can expect further increases in wheat.”
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