I thought I had seen most things in my 31-year career in the oils and fats world, but the last two years have been some of the most challenging. If Brexit, Covid and driver shortages were not enough, there have been several crop failures affecting most major oilseed crops. Then along came the Ukraine invasion. All these factors have been hitting anyone buying oils and fats – from food manufacturers to bakeries – and the impact is being seen on supermarket shelves.
As difficult as it has been for some of us with years of experience, I really feel for newcomers to the industry. Whether on the purchasing or selling side, they are currently going through a significant volatile period. However, this can also be a great learning period. If you can work your way through today’s challenges, you will be well equipped to deal with anything once things return to ‘normal’. One thing I have come to realise is that change is inevitable and it’s about adapting, learning, and innovating through these changes no matter how difficult it seems.
This principle should also be applied to companies. I fear too many get caught up with paralysis or retract from business during periods of extreme volatility and end up giving poor service to customers, which could ultimately result in them being worse off at the end.
Here at KTC, we have been hit by all the factors I mentioned earlier but we have tried to navigate our way through the difficulties and still look after our customers during the process. Covid hit the foodservice industry hard, with the closure of many of our customers, but this enabled us to change our business by moving into areas where we were less well known, such as food manufacturing and retail.
The Ukraine war is arguably one of the most significant disruptions to the market we’ve seen in recent times. It’s had a significant impact on global commodity markets from corn, wheat and sunflower. The ramifications on the world vegetable oil markets have been severe, pushing prices to new record highs. We are at the point were there is a shortage not only of sunflower oil but now rapeseed oil, as buyers switched due to uncertainties over supply.
We have been calling on the EU and other governments to either ease back or suspend biodiesel mandates to allow more supplies to go into the food industry. Around 60% of all palm in Europe is used in biodiesel for energy as well as 50%-60% of all rapeseed oil. This situation has a significant impact in Europe, but can be more devastating in developing countries as biodiesel mandates/uses are a global industry.
As an industry, for the first time, we now have a difficult decision on whether to supply for food or for biodiesel. Severe weather conditions have had devastating impacts on crops, wiping out over 40 million tonnes of Canadian rapeseed and South American soybean oil. This will lead to increased planting in the EU, UK and other producers this year, but it will still take many months for it to have any impact on the market. It looks like supply shortages will continue for the foreseeable future.