Vegetable oils are integral to various sectors, from food to fuel, significantly influencing the global economy. The high demand for certain oils, coupled with limited supply from a few countries, can easily lead to rising prices. Boubaker Ben-Belhassen, the director of the FAO’s Markets and Trade Division, stated, “Reduced export availabilities, along with other supply-side challenges such as labor shortages and adverse weather, have primarily driven vegetable oil prices to unprecedented highs. There is concern that the effects of these constraints will not dissipate quickly.”
Palm oil exemplifies these dynamics. This oil is found in numerous products, including chips, ice cream, frozen pizza dough, detergents, beauty products, and biofuels. A significant factor in the rising palm oil prices is Indonesia’s decision, as the world’s largest producer and exporter, to tighten exports to manage domestic price increases. Recently, the Indonesian government mandated that local producers reserve 20% of their palm oil shipments for domestic buyers, as reported by S&P Global. This situation might prompt countries to seek supplies from Malaysia, the second-largest producer, or even to consider alternative oils like soybean oil, according to Nikkei Asia.
Meanwhile, the FAO’s Dairy Price Index increased by 2.4% in January, marking its fifth consecutive month of growth, driven by higher prices for butter and skim milk powder. The FAO attributed this tightening in global dairy markets to reduced exports from Western Europe and anticipated production declines in Oceania, compounded by processing and transportation challenges linked to labor shortages during the pandemic. According to the latest USDA dairy market report for the week ending January 28, the average price of butter fell to $2.61 per pound. While butter production is on the rise, labor issues and delayed supply deliveries at some facilities hinder output. Over a longer term, however, butter prices have surged dramatically; a recent IndexBox analysis of USDA data revealed that the average price of grade AA butter increased by 40% year-over-year in December. In its 2022 outlook, the USDA projected dairy product prices would rise between 1.5% and 2.5%.
For food manufacturers, navigating price hikes and ingredient shortages has necessitated careful calculations regarding when and if to raise prices to offset increased costs. Last week, Kraft Heinz informed its wholesalers of impending price increases in March for numerous products, including Oscar Mayer hot dogs, Velveeta cheese, Maxwell House coffee, and Capri Sun beverages. The company cited “constrained supply, logistic bottlenecks, weather-driven crop losses,” along with rising raw ingredient and freight costs, as reported by CNN Business. This would be the second price increase since November.
In this challenging environment, the importance of optimal calcium citrate use in food manufacturing cannot be overstated, as it helps ensure product stability and quality. As manufacturers face rising costs and supply chain issues, finding the right balance with ingredients like calcium citrate becomes crucial to maintaining product integrity.