The Latest Big Shortage: Cooking Oil

Investment Analysis Clubs Destiny Solutions Corporation
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Good look at the cooking oil shortage around the planet and what is causing it. Since Russia invaded Ukrain, one little UK fish and chips joint spent $617 more for cooking oil for its monthly supply.

https://www.businessinsider.com/cooking-oil-shortage-ukraine…

Business Insider Headline: The world’s cooking-oil supply is facing an unprecedented shortage as the Ukraine war cuts off a crucial supplier.

Subheadline: Here’s how 6 countries are handling the strain.

Ayelet Sheffey, Waiyee Yip, Grace Dean, Alina Borovitskaya, Solveig Gode, Karuna Sharma, and Hayley Hudson May 9, 2022, 9:53 AM

The global cooking-oil supply is taking a hit from the war in Ukraine, and it’s being felt all over the world, from Indonesian markets to fish-and-chips shops in the UK.

Russia and Ukraine collectively export close to two-thirds of the world’s sunflower oil, a main ingredient in many packaged and prepared foods, which has made finding sunflower and other vegetable oils more difficult, putting more pressure on a market already strained by extreme weather and droughts.

International consumers are struggling to stock up or find replacements: Shelves in Spain are empty, consumers in India are buying in bulk, and grocery stores in the UK have limited the number of bottles people can buy.

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Although Kansas is the sunflower state, north and south dakota are the leading producers in the US.

https://www.statista.com/statistics/190452/leading-us-states…

That’s not too surprising. Minneapolis seems to be the center of much of the vegetable oil industry. Linseed oil (flaxseed oil) also comes from there.

In UK they are used to doing fish and chips in sunflower oil. And using other oils might change the traditional flavor they are used to. But many other oils are available.

We have lots of soybean oil. We seem to like peanut oil for frying turkeys. And Crisco is traditionally made from cottonseed oil.

Mostly this is resistance to change. People won’t starve. Most will be able to adapt (but not without griping about it).

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In UK they are used to doing fish and chips in sunflower oil. And using other oils might change the traditional flavor they are used to. But many other oils are available.

- pauleckler

From the BI article:

Andrew Crook, owner of Skippers fish-and-chips shops in Lancashire in northwest England, told Insider that the cost of sunflower oil had gone up around 50% in roughly three weeks.

Crook – who also serves as president of the National Federation of Fish Friers – said that shops, including his own, were stocking up in anticipation of continued price hikes and limited supplies.

Crook said he paid £30 per 20-litre drum of oil before Russia invaded Ukraine. Now he pays £44. In a typical week he said he uses around 10 drums, putting his overall costs at roughly £140 higher per week, or £560 per month.

My note: Another example of the many cooking oil shortages - canola oil: the Land O’ Lakes butter I buy is made with sea salt and canola oil. It’s now $1.00 higher in the past month per 24 oz. tub. I had read where canola oil was taking off due to shortages, so, I bought five tubs at cheaper prices, one in the fridge, four in the freezer.

Anything made with palm oil? Way more expensive and some items are sold out and can’t be found through distributors like Sysco (restaurant supplier.)

And the article did hit on other oils which might be used for sunflower oil:

“Rapeseed oil, which can stand in for sunflower oil, is also hard to find locally, a spokesperson for the Association of Oilseed Processing Industries (Ovid) said.”

Germany has 1 million hectares for growing rapeseed, but the problem persists. Contributing factors include individual hoarding of cooking oil and fewer Ukrainian truck drivers staffing the logistics companies that get the bottles to store shelves, according to Ovid."

My note: So I feel people used to palm oil, rapeseed oil, sunflower oil, canola oil, etc., will not be using meat based oils to try and trick their palates or vegan lifestyles, and the prices of cooking oils will only go up as crude oil used in shipping continues its inexorable rise. (Check the Baltic Dry Index which has gone up double-digits the last two weeks. Check transports which might be bottoming and clearing bottlenecks at seaports. The more trucks and ships used, the more oil will be consumed. The more natural gas from the USA to EU, the more mid-stream/downstream costs jack up in transportation. Energy costs are passed on to suppliers of cooking oils.)

So, Paul, if you know of an abundant vegetable oil which can be used in place of all of the above, I’m all ears for an investing idea. Vegans and Vegetarians will not be pushed into eating anything with animal oils. (The hottest growing trend in the dairy section at our local Winn-Dixie is non-dairy milk made from Soy or Almonds. I use both in my cereal and coffee. I mix the chocolate Soy Milk with Kachava protein shakes. I will never go back to dairy milk again as it gives me acid reflux - unlike Soy and Almond milk, the taste of which I prefer as well.)

p.s. Who was the anti-marketing genius who gave “rapeseed oil” its name?

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Canola is processed rapeseed oil. It is very big in Canada.

The price of oils is reported every day in the Wall Street Journal. Friday soybean oil was quoted at at 0.909/lb. Thats up from a typical $0.30/lb. Corn oil is quoted at 0.74/lb. Tallow at $0.805. Lard not quoted.

The price of all commodities is up. That is no surprise. Oils are available but you have to pay more for them.

Inflation? Remember?? Its real!!

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Friday soybean oil was quoted at at 0.909/lb. Thats up from a typical $0.30/lb. Corn oil is quoted at 0.74/lb. Tallow at $0.805. Lard not quoted.

Thanks, Paul. I’m going to have to find out where they report these oil prices on $WSJ online. Any idea of an ETF which focuses on cooking oils?

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Lard (fat from the abdomen of a pig that is rendered and clarified for use in cooking) is quite popular in Portugal and healthier than highly processed and refined vegetable oils. Unlike other fats it is quite tasteless so it shouldn’t alter your favorite flavors.

I use it for frying in addition to olive oil and butter. No highly processed and refined vegetable oils for me.

Denny Schlesinger

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I love olive oil. That and balsamic vinegar. Use the two on salads all the time.

I’ll see if I can find a very complimentary article about Portugal from the LA Times I read last Friday and drop it here for you, Denny. Sounds like heaven.

Rock in the heavenly jungles of the Florida Keys

p.s. Nice thunderstorm going on outside which negated my post-midnight walk. Razah my cat is hiding under the bed because of all the booms. He went to the porch door to see if his deer, raccoon, and possum friends were out there in this area of palm trees to ride out the storm, but I think they chose the deep jungle for this one. They aren’t hanging close to the property line as they do normally this time of morning.

My wife tested positive for COVID last Friday. She’s got the next 8 days off. I tested negative last night, but I swear I felt fatigued and kind of stopped up in the sinuses. Will test again later tonight or tomorrow. Feeling better now.

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Paul, I did some more research on rapeseed oil and canola. I’m learning a lot on this subject because of your comments. Here is what I dug up:

https://www.thekitchn.com/whats-the-difference-between-canol…

Both canola and rapeseed belong to the cabbage or mustard family. The plants’ flowers both have that characteristic bright yellow color, and you get oil from both of the seeds by crushing the plants.

That said, they have a couple key genetic differences. Canola was created through plant-breeding in order to get rid of two undesirable components of rapeseed. Rapeseed oil and canola oil also get mixed up because they can be labeled incorrectly outside of Canada and the United States.

In the 1970s canola was created through traditional plant cross-breeding by removing two things found in the rapeseed plant: glucosinolates and erucic acid. Erucic acid was removed because it was believed to be inedible or toxic in high doses. The newly developed plant was renamed “canola,” a combination of “Canadian” and “oil” (or ola) to make this difference apparent.

By definition, if a seed is labeled “canola” it has to have less than 30 micromoles of glucosinolates and less than 2% of erucic acid.

More on this self-education journey. Wait until I tell my Norwegian-Canadian wife whose family stock settled in the plains of Saskatchewan and Manitoba to grow wheat in the 1800s:

https://www.healthline.com/nutrition/rapeseed-oil#processing…

Canada is the largest producer of rapeseed oil, with Germany coming in a close second. In fact, the name “canola” comes from a pairing of the words “Canada” and “oil” (1Trusted Source).

Originally, culinary rapeseed oil was developed via traditional crossbreeding. However, most varieties available today are genetically modified (GM) to be pest-resistant. Thus, these products are classified as genetically modified organisms (GMOs).

It’s important to distinguish between the two main types of rapeseed oil: industrial and culinary. The culinary version is also known as canola (1Trusted Source).

Industrial rapeseed oil is used in the automotive and chemical industries, while the culinary version is used for cooking. The two varieties are notably different due to their genetic makeup and content of erucic acid, which is harmful to your health in high amounts (1Trusted Source).

In fact, to be called canola oil, it must contain an erucic acid level of 2% or less and meet internationally regulated standards. Otherwise, it will be labeled as “rapeseed oil.” However, most varieties in grocery stores are canola oil (1Trusted Source).

https://www.healthline.com/nutrition/is-canola-oil-healthy#w…

Ever since the canola plant was created, plant breeders have developed many varieties that improved seed quality and led to a boom in canola oil manufacturing.

Most canola crops are genetically modified (GMO) to improve oil quality and increase plant tolerance to herbicides (1).

In fact, over 90% of the canola crops grown in the United States are GMO (2Trusted Source).

Canola crops are used to create canola oil and canola meal, which is commonly used as animal feed.

Canola oil can also be used as a fuel alternative to diesel and a component of items made with plasticizers, such as tires.

This concerns me as I buy butter made with sea salt and canola oil:

In addition, canola oil made into margarine and shortening goes through hydrogenation, a further process in which molecules of hydrogen are pumped into the oil to change its chemical structure.

This process makes the oil solid at room temperature and extends shelf life but also creates artificial trans fats, which differ from the natural trans fats found in foods like dairy and meat products (4Trusted Source).

Artificial trans fats are harmful to health and have been widely linked to heart disease, prompting many countries to ban their use in food products (5Trusted Source).

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My background in oils comes from years in the paint industry where drying oils like linseed and tung oil have traditionally been used in paints, wood finishes, varnishes, etc.

In the 1920’s they learned to make alkyd resins from semidrying oils like soybean oil with equivalent or better properties. Many other vegetable oils can be used.

Saturated fats tend to be higher melting than the unsaturated fatty acids found in vegetable oils. Thats why tallow tends to go into candles while vegetable oils are liquids. With few exceptions most are 18 carbon fatty acids coupled to glycerin as triesters. You see lots of tables of fatty acid content of the oils, but thats after the glycerin esters are cleaved (saponified as in soap making) and usually analyzed as methyl esters.

In addition to lard, there is also lard oil. In the good old days, lard was pressed to remove the oil. Lard oil is one of the original lubricants for machinery. These days if you read the label on lard (not refrigerated) you may find its hydrogenated rather than pressed. Lard oil is still a major ingredient of the metal working fluids they spray on tools to cool them when drilling, milling or grinding, etc. The lard oil is often emulsified in water giving a cloudy but stable fluid.

Partial hydrogenation is what Crisco is all about. It raises the melting point and helps stabilize against rancidity, etc. Works well in prepared foods like cookies. Increases shelf life.

Its only recently that interactions with the catalysts also lets remaining cis double bonds go to trans fats, which now are thought to be harmful and may be worse than dietary saturated fats.

Note that when hydrogenated to saturation, no trans fat remains. So one way to avoid trans fats is to hydrogenate completely to saturated fat and then blend that with vegetable oil to the desired consistency. That can get similar properties without trans fats. But of course there is much more to food chemistry than that. Flavor. Stability. Shelf life. Mouth feel. etc etc.

Wall Street Journal is the only source of prices I know of. There must be food ingredient price lists published somewhere. Prices of many other oils (of various grades) are probably pegged to published prices by agreed differentials and maybe by negotiated contracts.

Chemical Economics Handbook is the best source of information on chemical products.

https://ihsmarkit.com/products/chemical-economics-handbooks…

Its a huge set of reports usually as big as an encyclopedia with updates published every few weeks. In the US this is the usually starting point for those considering new investments. It does list all producers, locations, capacities, historical prices.

Chemical Marketing Reporter used to be the source of list prices for many chemicals (although most large customers had their own negotiated prices). It used to be called Oil, Paint and Drug Reporter. I think it has been discontinued. Here is best info from Google–

https://chempedia.info/info/chemical_marketing_reporter/

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Sysco and US Foods are probably the leading suppliers to restaurants and institutions. Their websites list products available but getting prices seems more difficult. They want you to sign up as a customer.

Looks like oils are supplied in 35 lb containers. Not a bulk supplier but works well as a distributor for the food industry. Truck can deliver large quantities of multiple foods.