Prices of edible oils have been rising across the world. Palm oil, the world's most consumed vegetable oil, surged to a new record high, spreading concerns about persistent global food inflation.
Malaysia's palm oil futures soared more than 40% this year, while soybean oil is up more than 50%. Prices of canola oil are also at a record.
Bloomberg notes the reason for the price surge is "because of the emergence of pent-up demand as economies reopen after COVID, the outlook for more use in renewable fuels as energy prices soar and production problems in major growers."
"Palm oil is not only riding on tight supply, which continues to sustain higher prices, but is also getting broader external support from energy markets," said Sathia Varqa, owner of Palm Oil Analytics in Singapore.
Production of palm oil in Malaysia has fallen this year because of a foreign worker freeze, exacerbating the country's labor shortages. The Malaysian Palm Oil Board reported that production in the first nine months of the year was the weakest since 2017.
"There are no stopping prices from going higher" until policies are implemented that are likely to cool the commodity market, such as higher interest rates," Varqa said.
This means that the weight of vegetable oils in the UN's Food and Agriculture Organization's FAO Food Price Index will continue to pressure global food prices higher. Last month, the index hit a new decade high, which includes a basket of food commodities (such as cereals, vegetable oils, dairy, meat, and sugar).
Global food prices surging to decades high is no laughing matter but an ominous sign for emerging market economies where households allocate more of their budgets to food. Rising food prices can cause discontent with governments and spark social unrest. SocGen's Albert Edwards first warned about this right before the pandemic began.