08/03/2022 (The Edge Markets), Kuala Lumpur - A blistering rally in edible oil prices is likely to continue as investors have not yet fully priced in risks related to Russia’s invasion of Ukraine, according to the world’s biggest palm oil planter by acreage.

“If your window of purchasing is six months, then it’s not a bad idea for you to be buying,” said Mohd Haris Mohd Arshad, the managing director of Sime Darby Oils, a downstream unit of Sime Darby Plantation Bhd. “The market has not priced in the risks,” he said in an interview.

The global crunch in vegetable oils could worsen if farmers in Ukraine miss the March-April sunflower planting season, he said. If there’s no planting, “you might as well write off the entire 2022-23 supply from Ukraine”, he added. That will add to higher food costs across the world, Mohd Haris said.

Concerns over fresh sowing in Ukraine following Russia’s attack have made edible oil markets jittery, with prices of palm and soybean oils, the two most used oils, surging to records.

Russia and Ukraine ship about 80% of the world’s sunflower oil supplies. The conflict has closed major ports in Ukraine, and severed logistics and transport links.

“2022 is the year of food inflation,” Mohd Haris said.

“We’ve not even reached the peak of the commodity supercycle. This is going to be a real issue for governments as they try to rein in prices.”

In Malaysia, the world’s second-biggest palm oil producer, output growth may be flat this year as the Southeast Asian nation struggles with a shortfall of workers that is “not going to be replenished anytime soon”, Mohd Haris said. There could be more palm oil available if Indonesia slows its biodiesel mandate, but such a move seems difficult, he said.

Indonesia, the world’s biggest palm oil producer and exporter, will push ahead with its ambitious biofuel programme, said Dadan Kusdiana, the director-general of new and renewable energy at the Ministry of Energy and Mineral Resources. The government is monitoring crude palm oil and petroleum prices closely, he said.

Palm oil for May delivery jumped as much as 6.2% to RM6,666 a ton on Monday (March 7), but remained below an all-time high of RM7,108 reached last week for the rolling, most active contract. Major consumers have slowed buying. India’s palm oil imports probably sank to the lowest level in 12 months in February, according to veteran trader GG Patel.

Vegetable oil inventories in top buyers India and China are low, Mohd Haris said. Importers are not stockpiling supplies as markets are too volatile and prices are very high, he said.

There’s hardly any demand for near-term deliveries even as the Ramadan month approaches, he said. “Buyers are very scared to buy.”