Before diving into our insights, we want to communicate that we support peace and that no wars are justified!
It is necessary to recognize the deep humanitarian crises caused by the ongoing wars and conflicts. There’s devastation across regions like Israel-Gaza, Russia-Ukraine, and Israel-Hezbollah. These conflicts have displaced families, cost countless lives, and torn communities.
But beyond this human tragedy, there are far-reaching economic impacts in terms of disrupting industries, damaging livelihoods, and upending essential supply chains.
The global supply of edible oils has shifted due to major disruptions to supply chains caused by the Russo-Ukrainian conflict, coupled with heightened tensions in the Middle East.
Ukraine, a key player in the global sunflower oil market, once supplied 52% of the world’s sunflower oil. However, the war has slashed its production and exports due to widespread infrastructure damage and port sieges.
This disruption led to a sharp 58% drop in sunflower oil exports in 2023 and price rises for soybean and rapeseed oils.
That said, we are not downplaying the tragic human cost of these conflicts. Instead, we will shed light on the significant impact these events are having on the edible oil sector.
Especially where price hikes, disrupted trade routes, and shifting market dynamics are becoming the new norm.
For further reading, we’ll be focusing on how these geopolitical tensions are reshaping the edible oil industry.
How Global Conflicts Are Impacting the Edible Oil Industry
The edible oil industry is intertwined with global supply chains, making it especially vulnerable to geopolitical upheavals.
Currently, several major conflicts are disrupting the flow of key edible oils, pushing prices higher, and creating shortages in various parts of the world.
Each conflict has a unique impact on the edible oil industry, contributing to rising prices, strained logistics, and fluctuating supply.
We’ll explore each in detail now.
Russo-Ukrainian War
The Russo-Ukrainian war has severely disrupted global sunflower oil supply chains. Before the conflict, Ukraine and Russia accounted for about 70% of global sunflower oil exports.
Ukraine, once the world’s largest exporter, has seen production grind to a halt due to widespread damage to crushing facilities and blocked trade routes. This has led to a 53% price increase in sunflower oil, causing ripples in the broader edible oil market, including soybean and rapeseed oils.
There are also logistical challenges, which further complicate the export of sunflower seeds and oil. Ukrainian rail systems, which are critical for transporting seeds to crushing facilities, have shifted their focus toward humanitarian efforts, limiting commercial traffic.
Many crushing plants, particularly near key ports, have also been forced to shut down, worsening global supply shortages.
Israel-Hezbollah Conflict
The escalating Israel-Hezbollah conflict is sending ripples through global markets, particularly in regions reliant on the Mediterranean for shipping. Although the Middle East isn’t a major producer of edible oils, it plays a crucial role in global supply chains.
Here’s how:
Oil accounts for almost 12% of global trade passing through the Red Sea, while 8% is natural gas. Much of these energy resources are transported via the Bab el-Mandeb Strait, located west of Yemen, or through the Strait of Hormuz, connecting the Persian Gulf to the Indian Ocean, situated on the other side of Saudi Arabia.
These critical waterways are major transit routes for energy supplies, making them highly vulnerable to geopolitical tensions and conflicts in the region.
So, it is often perceived (though not experienced) that due to the Israel-Hezbollah conflict, the region's broader geopolitical instability will have effects on edible oils. This is because traders anticipate potential disruptions in shipping routes linking Europe, Asia, and Africa.
Disruptions here have driven up speculative prices. Shipping insurance premiums in the Mediterranean have increased by 15-20% as tensions heighten, adding costs to goods, including edible oils. This uncertainty pushes prices higher across global markets.
Sudanese Civil War and Its Impact on the Edible Oil Industry
Sudan is a leading global supplier of oil seeds like sesame and groundnuts, and its major exports are to the Middle East and Africa.
However, the ongoing war has affected the country’s agricultural sector. Approximately 65% of Sudan’s population is engaged in agriculture, and the conflict has disrupted farming activities, trade routes, and export infrastructure. This has led to sharp drops in production and distribution. For instance, the war has caused agricultural output in key regions like Greater Darfur to fall by up to 80%.
Such prolonged instability does have implications for the edible oil market. Sesame seeds, a key export for Sudan, are vital for the production of sesame oil, which is widely used in the Middle East.
Disruptions to Sudan’s exports create shortages in neighboring markets, driving up prices and pushing importers to seek alternative suppliers at higher costs. Additionally, with nearly 18 million people in Sudan facing food insecurity, domestic edible oil production has been severely impacted, further limiting the country’s ability to export.
Supply Chain Disruptions and Price Volatility
Global edible oil supply chains are intricately connected, which means that a disruption in one part of the world can send shockwaves across markets, leading to widespread price fluctuations.
The ongoing conflicts, such as the Russo-Ukrainian war and the Israel-Hezbollah conflict, have brought significant disruptions, especially in the sunflower and soybean oil markets.
One clear example is sunflower oil prices in India, which saw a dramatic surge of around 53% following the onset of the Russia-Ukraine war. Prices jumped from Rs. 125 per kg to Rs. 185-190 per kg in just one month as supplies from Ukraine were cut off. This is because the world’s largest sunflower oil exporter was cut off due to blocked ports and damaged infrastructure.
India, a country that imports about 60% of its edible oil needs, felt the strain intensely. As sunflower oil imports dwindled, India faced severe financial pressure, having to pay higher costs for alternative sources of oil.
The shortage forced the government and companies to explore other supply chains, but the additional costs of importing from alternative countries such as Argentina and Brazil added further economic strain. Due to inventory shortages and volatile global prices, importers faced increased finance costs.
These disruptions haven’t just been confined to sunflower oil. Soybean oil, another essential cooking oil for many countries, has also experienced price volatility due to logistical challenges and increased transportation costs.
Impact on Major Edible Oil Categories
Like many other sectors, the edible oil industry is shaped by various factors, including geopolitical tensions, environmental policies, and market demands. Each type of edible oil has unique challenges regarding production and supply, and recent global disruptions have only amplified these challenges.
Whether the war in Ukraine affects sunflower oil exports or labor shortages in Southeast Asia impact palm oil production, these disruptions reverberate across the world, driving up prices and reducing availability.
Here’s a closer look at how current global events have impacted each major edible oil category.
Sunflower Oil
The Russo-Ukrainian war has significantly damaged global sunflower oil supplies. Ukraine and Russia, which together account for almost 70% of global sunflower oil exports, have drastically cut back production due to the ongoing conflict. Ukraine, which supplied 52% of global sunflower oil, has seen a significant reduction in exports as production plants are destroyed and ports remain blocked.
This has caused sunflower oil prices to skyrocket, particularly in India, where prices rose by over 53% due to the shortage. The war has forced major importers in India, Europe, and the Middle East to look elsewhere, though alternatives remain limited and often come at a higher cost.
Soybean Oil
Soybean oil, another critical global commodity, is heavily impacted by the political and economic challenges facing Brazil, Argentina, and the U.S., the top producers of this oil. Argentina, one of the largest exporters, has been battling economic instability and inflation, which has hampered production and export capacity.
Brazil, too, is facing environmental pressures due to deforestation concerns, which has led to stricter regulations that could slow down production.
As these countries navigate internal challenges, the global supply of soybean oil remains vulnerable to further disruptions, particularly for importers like China and India, which depend on stable supplies to meet their domestic demand.
Palm Oil
Malaysia and Indonesia dominate the global palm oil market, providing over 85% of the world’s supply. However, recent labor shortages, environmental scrutiny, and government policies have placed additional pressure on production.
Malaysia has struggled with labor shortages that are slowing production rates, while Indonesia has faced increasing demands from environmental groups to curb deforestation linked to palm oil plantations. Any further disruptions in these countries could have significant ripple effects on global markets, as many developing nations rely on affordable palm oil for cooking and food production.
Financial Ramifications for Key Players in the Edible Oil Industry
The edible oil market witnessed unusual disruptions as key players in India, like Adani Wilmar and Ruchi Soya, faced supply chain hurdles and volatile pricing. But, instead of crumbling under pressure, both these businesses adapted their strategies to stay profitable.
Here’s a quick breakdown of both.
Adani Wilmar: Finding Stability Amid Chaos
Adani Wilmar faced pressure as global supply chains were disrupted. Yet, despite these challenges, the company managed to report an 18% growth in edible oil volumes.
So, how did they pull it off?
They leaned heavily on its robust infrastructure, refining capacity, and vast distribution network.
The strategy wasn’t about drastic changes but about fine-tuning processes and leveraging their market position to maintain profitability—even when prices and logistics were unpredictable.
Ruchi Soya: Staying Resilient Through a Crisis
On the other side, Ruchi Soya, now part of Patanjali Ayurved, took a slightly different approach to weather the storm.
With the war in Ukraine drying up sunflower oil supplies, the company faced a tough decision: either suffer the supply shortage or shift focus to other oils like soybean and palm oil. Ruchi Soya opted for the latter by leveraging its strong refining capabilities and across-the-board distribution network to redirect quickly.
Their ability to adapt suggested they could continue sourcing oils from other regions and keep the supply flowing. This wasn’t a small feat, considering how heavily India relied on Ukrainian sunflower oil before the conflict.
Real-World Impact: Price Hikes and Market Ripples
As the sunflower oil supply dried up due to the conflict in Ukraine, the global edible oil markets felt the pinch.
In India, where edible oil imports faced domestic consumption, the shortage led to a 27% rise in soybean oil prices and a 26% increase in palm oil prices. This price surge affected companies and consumers, making everyday essentials like cooking oil far more expensive.
For Adani Wilmar and Ruchi Soya, these price hikes presented both challenges and opportunities—higher prices meant more significant revenue potential but also a tighter squeeze on margins as raw material costs surged.
What the Future Holds
The future of the edible oil industry is deeply uncertain, largely due to the ongoing geopolitical tensions in key regions like Ukraine and the Middle East.
Wars are unpredictable, and the effects they have on global supply chains can linger long after peace is restored.
For companies in the edible oil sector, being prepared for the future is essential. Whether conflicts escalate or stabilize by 2025, the industry needs to adopt strategies that can help mitigate risks and ensure a steady supply of raw materials.
Possible Scenarios for 2025: Escalation or Stabilization?
If conflicts continue or escalate, the edible oil industry could face even steeper price hikes and more severe supply shortages. The prolonged Russo-Ukrainian war, for instance, could further limit sunflower oil production, keeping prices elevated globally.
On the other hand, if the conflicts stabilize, we might see a gradual return to more predictable supply chains, but the road to recovery will be long and uneven.
The Need for Diversification and Investment in Local Production
To avoid over-relying on regions prone to conflict, both companies and governments need to look beyond their usual supply chains for edible oils. Countries like Indonesia and Malaysia, which already dominate the palm oil market, are well-positioned to step in and help fill any gaps left by disruptions elsewhere.
Similarly, Brazil is a key player in the soybean oil market, and ramping up imports from these regions can help buffer against future shortages.
India, in particular, has recognized the risks of relying too heavily on imports and has launched the National Mission on Edible Oils. This initiative is focused on increasing domestic oilseed production and reducing the country’s heavy dependency on imports, especially for sunflower and palm oils.
Challenges Ahead: Input Costs and Logistical Constraints
The edible oil industry will likely face several ongoing challenges. Input costs are expected to remain high due to rising energy prices and transportation bottlenecks, particularly in war-torn regions.
Businesses in the industry should be looking for long-term strategies to make their supply chains more sustainable and adaptable. This includes investing in logistics infrastructure, enhancing local production capabilities, and developing contingency plans to weather future geopolitical shocks.
Conclusion
Like many others, the edible oil industry is caught in the crossfire of global conflicts. While wars sadly focus on human suffering and loss, their ripple effects on industries are undeniable.
Beyond the headlines, wars disrupt not only nations but the very systems that feed people, impacting everyday products like edible oils. While these crises bring about tragic human costs, they also send shockwaves through economies, supply chains, and industries, all of which are connected to people’s livelihoods.
In this piece, we’ve seen that the solution for the edible oil sector isn’t a quick fix. The future demands something bigger—a collective effort from industry leaders and governments alike to strengthen supply chains, increase local production, and embrace sustainable farming practices. These steps are no longer luxuries but necessities to protect against further disruptions.
Still, the heart of this conversation should always return to the value of peace. As much as the edible oil industry is vital to everyday life, wars affect far more than markets. They tear apart communities, families, and futures.
Our position is clear—we remain neutral because we believe that lasting solutions come from peace, not conflict. Feel free to connect with our experts to discuss how we can collectively contribute to a more resilient and sustainable future for the edible oil sector.
