EDIBLE OILS MARKET ANALYSIS

Climate change and volatility in price are major hurdles restraining the growth of the global edible oils market. Rising temperatures and changing weather patterns caused by climate change are negatively impacting oilseed cultivation around the world. Droughts and excessive rains are reducing crop yields, affecting the availability of edible oils. According to data from the UN Food and Agriculture Organization (FAO), the soybean crop production in Argentina declined by more than 10% between 2021-22 due to prolonged droughts. As Argentina is one of the largest soybean exporters, this has put upward pressure on global soybean prices.  Similarly, palm oil production has been declining in Indonesia and Malaysia in recent years partly due to shifting rainfall patterns brought by climate change. As per data from the U.S. Department of Agriculture's Foreign Agricultural Service (FAS), Indonesia's palm oil production fell by around 3% in 2020 compared to the previous year. This lowered supplies have contributed to higher palm oil prices in the international market. The volatility in prices of edible oils poses another challenge. Geopolitical tensions, changes in government policies of major producing countries, and fluctuations in currency exchange rates often result in sharp swings in the prices of edible oils like soybean, canola and sunflower oils. According to data from leading NGO ActionAid, sunflower oil prices rose by over 50% in Europe between February-May 2022 alone due to uncertainties arising from the Russia-Ukraine conflict. Such frequent and steep price shocks discourage food manufacturers from investing and undermine consumer demand, hampering the growth potential of the edible oils industry.

Opportunities: Rising incomes in developing nations

Rising incomes in developing nations present a great opportunity for growth in the global edible oils market. As per capita incomes rise, consumers in developing countries are able to spend more on foods that were previously unaffordable. This allows for higher demand of edible oils such as soybean, sunflower, and canola oils which are seen as more premium options compared to traditional oils such as palm and coconut oil.  A direct consequence of increasing incomes is changes in dietary patterns and food consumption habits. People shift away from basic staple-based diets to more varied diets that include higher amounts of meat, dairy and baked goods. This increases the demand for edible oils as they are widely used for cooking various food items as well as in many processed food products. The growing middle class in large developing nations of Asia, South America, Middle East and Africa regions have more disposable incomes to spend on better quality edible oils. According to data from United Nations World Food Programme, the prevalence of undernourishment in developing countries declined from 23.3% in 2015 to 19.3% in 2020 before the pandemic. This indicates more people had access to adequate calorie intake and nutrition. With continued economic growth projected in coming years, the negative impact of COVID-19 on incomes is expected to be temporary. More people will join the consuming class in developing worlds which will support strong growth in edible oils market.