United Biscuits

Rapeseed and palm oil are widely used in food manufacturing

Food manufacturers are facing up to record rapeseed and palm oil prices as poor global harvests continue to undermine supply.

Rapeseed spot prices in Rotterdam hit a 50-year high in September as a result of poor European supplies and huge losses seen in Canada.

The recent surge is driven by tight supplies, as well as a rise in crude oil prices. Canada, the world’s top exporter of rapeseed, has seen its rapeseed production fall by 34% this year.

The strain has caused rapeseed futures prices in Paris to rise a further 5% since the start of October.

Rapeseed and palm oil are both major ingredients across food manufacturing, and a price rise in one often influences the other.

Malaysian palm oil futures have risen 9% since the start of October, the result of strong global demand for vegetable oils plus lower production in Malaysia. Labour shortages in Malaysia caused by restrictions on overseas workers led to a significant decline in palm oil production.

Exports of Malaysian palm oil products between 1 October and 20 October fell 15% compared to the previous month, cargo surveyor Intertek Testing Services said this week.

Palm oil demand has surged in recent weeks due to the Diwali festival in India and Golden Week in China. While prices could ease once the festivals have passed, said Archit Singh, market analyst at Mintec, the start of the year will see Chinese New Year, when demand typically picks up again.

“The only real threat to rising prices is if we see a significant development in a Covid variant which stifles demand from hospitality,” he added.

Mondelez and Nestlé, two of the biggest users of vegetable oils, both declined to comment on the price rises, however Dirk Van de Put, CEO and chairman of Mondelez told the Sunday Times last week “we’re [under] such severe inflationary pressure that we are obliged to do straightforward price increases”.