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EA’s edible oil prices to surge in 2024

EA’s edible oil prices to surge in 2024

(Courtesy photo)

In the wake of persistent challenges faced in 2023, the edible oil market in East Africa is bracing for further price hikes in 2024. The scarcity of high-quality sunflower seeds, expensive palm oil imports, and intricate global geopolitical dynamics are poised to contribute to this upward trend.

Edible oil prices saw a substantial increase in 2022, and the trend continued in 2023, with the escalating costs attributed to various factors affecting the region.

The strengthening of the dollar against regional currencies and global conflicts such as the war in Ukraine and the Israel-Gaza conflict have been cited as possible justifications for this trend.

These issues have caused supply disruptions, particularly in the palm oil sector, with shipping freight costs soaring. Manufacturers are apprehensive about the rising production costs, anticipating no relief in the near future.

Abdulghani Mohamed Al-Wegih, chairman of the edible oil sub-sector at the Kenya Association of Manufacturers, acknowledges the challenges and emphasizes the need for a long-term solution. He suggests the proposal to grow palm trees could be a viable strategy, albeit one that requires scientific assistance and technology from palm-producing countries like Indonesia. However, he notes that cultivating palm trees is a lengthy process, taking up to 10 years for the trees to reach the production stage.

The global demand for clean edible oil products is expected to remain high until 2029, presenting lucrative opportunities for market players. Nevertheless, local challenges, including the availability of quality sunflower seeds in Tanzania, pose obstacles that could further drive prices upward.

In Tanzania, delays in the procurement of sunflower seeds during the planting season indicate a potential decline in supplies for the current year. Sunflower farming plays a significant role in Tanzania, being the 16th largest producer globally and the second most important producer in Africa after South Africa. Sunflower contributes to 35 percent of all oil-seed production in Tanzania.

Kenya, on the other hand, continues to face a reliance on imports, producing only 34 percent of its edible oils and fats. Despite having the capacity to produce these oils domestically, the country imports over 90 percent of its vegetable oils, amounting to Ksh100 billion ($633.4 million). According to the Presidential Economic Transformation Secretariat, edible oils contribute over Ksh160 billion ($1.07 billion) to the import bill, with duty-free imports aimed at alleviating the impact of high prices on consumers. Notably, Kenya predominantly imports palm oil from Malaysia.

Uganda is currently addressing the decline in its edible oil exports by initiating the rehabilitation of key access routes to oilseed projects in 81 locations. The country’s export earnings from edible fats and oils dropped from Ush1.05 trillion ($281.1 million) to Ush338.2 billion ($90.5 million) in July 2023. The country is currently meeting less than 40% of demand, aims to boost output by revitalizing oilseed projects, incorporating value addition, and improving transportation links to market centers.

As East Africa grapples with both global and local challenges, the edible oil market is poised for a complex year ahead, with prices expected to rise, creating concerns for both consumers and industry stakeholders.

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