SINGAPORE (Bloomberg) -- One of the world’s most popular raw materials is as expensive as it’s been in eight years, a rally that points to higher food prices -- and backsliding on biofuel initiatives -- in the months to come.
The price of palm oil, an ingredient in about half of all supermarket goods, is up almost 70% since the year’s low in May.
Bad weather has disrupted the planting of rival oils, and the supply of palm is also tighter, the result of a shortage of migrant workers on Malaysia’s plantations.
At the same time, optimism about a coronavirus vaccine has improved economic forecasts and energized demand.
Palm’s rally has outpaced soybean oil, which has climbed about 52% from its March low.
Overall, the rising prices suggest food is about to get more expensive, at a time when consumers around the world are already under economic stress.
"The higher prices will hit supermarket shelves in a month,” said Sathia Varqa, owner of Palm Oil Analytics in Singapore. "Edible oils are the most-exposed.”
As the price of palm oil has soared, it’s nearly caught up to soybean oil, its closest substitute. Outside of brief moments earlier this year, the gap hasn’t been this narrow since 2011.
That same year, one of the strongest La Nina episodes in decades ravaged crops and squeezed edible oil supplies around the world. Food prices soared, which contributed to the popular unrest in the Middle East that eventually resulted in the Arab Spring.
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