Suppliers and shoppers will be enjoying the drop in fuel costs, but it is compounding the woes of the cooking oil industry.
Wholesale prices of vegetable oils such as sunflower, palm and rape have been on a downward slope for about five years. More recently, the oils industry has seen strong supply of some oils and the drop in crude oil prices - and consequent reduced demand for biofuels - contribute to further declines.
“The biggest influence on all of this is probably the cost of crude oil and I see this going lower,” says Mike Baldrey, sales director at supplier KTC Edibles. “Nobody wants to put vegetable oil into biodiesel when it is the same price or even more expensive than diesel.”
The situation is in stark contrast to olive oil, where dry weather in Spain and olive tree disease in Italy have weakened supply and brought a 10% hike in UK retail prices.
Conversely, retail prices of larger (750ml-plus) bottles of product labelled as generic ‘vegetable oil’ have dropped 14% year on year from £1.36 a litre to £1.17, while sunflower oil is down 8% [Brand View].
“The declines have filtered into the marketplace – it is a competitive market so if Joe Bloggs put his price down we have to too,” said one supplier, adding the pound shops were “loving it” as they could now sell a litre of vegetable oil at £1.
The supplier said it was difficult to sell oils as trade customers knew prices might be cheaper the following week, and that traders were talking up issues with the weather, for example, in an effort to get prices moving up.
“Everybody is desperate to grasp a straw to get the market to move,” he added. “A low market is not good for farmers, traders or suppliers – the only ones it are good for are the consumer.”
According to Mintec, there are some positive signs. Global sunflower oil production is expected to remain stable, it says, but forecasts for lower production in the EU are expected to add upward pressure to prices. Mintec adds global consumption of rapeseed oil is forecast to exceed production (tipped to be down 3% year on year in 2015/16) and that this could drive up prices.
But Baldrey said he feared prices might continue to fall. “In my opinion we will see the market fall further as we get closer to harvests as we have had generally fantastic growing weather,” he said.