Oil turmoil: Snack and bakery producers are scrabbling to survive the increasingly slippery slope of skyrocketing costs

By Gill Hyslop contact

- Last updated on GMT

Pic: GettyImages/Jonathan Knowles/DNY59
Pic: GettyImages/Jonathan Knowles/DNY59

Related tags: Russia-Ukraine conflict, Sunflower oil, Inflation, Edible oils, HFSS, European Snacks Association, SNACMA, Scottish Bakers, Reformulation for Health, Carbon dioxide emissions

War, drought, swine fever and virus-related labour shortages – notwithstanding the increasing demand from the biofuel industry – have placed immense pressure on the edible oils industry, resulting in a much decreased supply and soaring prices around the globe. This is bad news for the snack and bakery industries, which rely heavily on sunflower oil in particular, forcing many to rethink their recipes.

It’s fitting that Ukraine’s national symbol is the sunflower, being the largest sunflower oil producer in the world, with a 2019 production of 4,400,324 tonnes and 48% of global sunflower-seed and safflower oil exports, according to the Observatory of Economic Complexity.

Sunflower oil and seeds alexxx1981
Pic: GettyImages/alexxx1981

Oil-type sunflower seeds used for the extraction of oil contain about 38%-50% oil and around 20% protein. 1.398kg of sunflower seeds are needed to product one litre of edible oil.

It hasn’t helped that Russia’s invasion – itself the second largest producer, with a 2019 production of 4,063,080 tonnes and 24% of world exports – has hampered farming efforts and blocked Ukraine’s ports, disrupting trade, causing shortages and sending prices soaring as much as 1,000%.

Greasing the skids to … today

Vegetable oil – just like petroleum and gas – is a globally traded commodity that follows international pricing, and while prices escalated very quickly as a result of the war, the implications go far beyond.

According to Rabobank, before the conflict, edible oil prices were already double the five-year average. The three most-widely consumed oils globally are canola, palm and soybean, and each has been facing its own pressures.

Before the war, global canola supply had been hit by a drought in key producing countries;  soybean harvests were hammered by dry weather in South America, while the extra demand from China to rebuild pig herds after an outbreak of swine fever scuppered supply even further; and Indonesia – the world’s biggest source of palm oil – closed shop amid a hangover of COVID-driven worker shortages.

Indonesia’s ban on exports had countries dependent on its supply scrambling for other suppliers and alternative oils. Some countries – including Turkey and Argentina – followed suit with bans to ensure their own citizens had supply, while edible oils across the board – including olive oil and cottonseed – saw higher prices.

Sunflower oil graph edible oil prices

And it doesn’t stop there. Rabobank said fossil fuels are now so expensive that markets are turning to edible oils to make biodiesel instead.

“Really, we have found ourselves with a litany of issues feeding into this that wouldn’t be expected normally,”​ Rabobank’s senior commodities analyst Cheryl Kalisch Gordon told the media.

Threat to survival

Scottish Bakers said the early signs of rising costs began to become evident over a year ago, but nothing prepared the industry for the runaway situation it faces today.

Ingredient costs have jumped 41%; fuel by 44%;  gas has skyrocketed by 207%; and electricity by a mind-numbing 214% – teetering the sector on a knife-edge.

“The current economic crisis – the biggest this country has seen in nearly 50 years – is  placing unprecedented strain on the Scottish baking industry, and many of our members report an existential threat to their survival due to soaring input costs and widespread recruitment challenges,”​ said Alasdair Smith, CEO of Scottish Bakers.

“Throughout the darkest days of the pandemic, our members worked hard to keep baking, recognising the vital role they have in Scotland’s food chain. Many businesses went above and beyond by ensuring deliveries of products went to those most vulnerable in our communities or those on the frontline helping to protect and treat us.

“I am now asking the UK government for urgent action to support and provide relief to this most noble of trades that every day puts fresh bread, savoury snacks and sweet treats into our communities.”

The slippery slope to recovery

The oil markets are – hesitantly – showing signs of recovery.

In June, UK levy board AHDB said Paris rapeseed prices, one of the continent’s benchmarks, fell below €700 per tonne for the first time since 4 March.

The FAO reported that, in addition to the imminent arrival of the new crop in the EU, favourable growing conditions in Australia would weigh in on rapeseed quotations. As for sunflower seed, world prices dropped markedly in June, largely tied to lower sunflower oil and meal values that resulted in subdued uptake from crushers.

However, the overall situation remains volatile. For instance, just this month, there has been talk of skyrocketing olive oil prices as drought and heat waves plague Europe. As such, Rabobank doesn’t expect prices to drop or reduce in their volatility substantially in the near term.

The producer’s outlook

So, how are producers in the bakery and snacks sectors scrabbling to survive? Edible oil is a fundamental staple ingredient and there’s only so much of a price hike they can absorb.

In the US, the oils commonly used by food manufacturers have surged by 45% since March 2021 and by a whopping 152% over the past two years, outpacing overall food inflation, according to Gro Intelligence, an agriculture data platform. The latest consumer price index (CPI) data showed a 14% rise in the price of cooking oil in the past year – surpassed only by fruit and veg.

sunflower oil graph CPI

Sebastian Emig, director general of the European Snacks Association (ESA), said the war in Ukraine​ has tremendously impacted production.

“We are counting on the European Commission and Member States to provide our as well as other industries with sufficient flexibility in terms of food labelling to maintain food safety standards, production requirements as well as consumer expectations,” ​he told BakeryandSnacks.

“Members of our association do use to a certain degree other oils; however, due to the excellent functional properties, sunflower oil remains their first choice.”

In the UK, Foods Standard Agency (FSA) and Food Standards Scotland (FSS) have temporarily allowed the use of corn oil instead of sunflower oil without producers having to change labels. Both already allow the switch for palm, coconut and soybean oil.

“SNACMA members have been working with suppliers and internal teams to ensure that any alternatives used are similar in properties to sunflower oil, both from a nutrition and a composition perspective, to ensure their products maintain their usual high quality and that changes do not have an impact on consumers,”​ Andrew Curtin, director general of the UK Potato Processors’ Association (which incorporates the Snack, Nut and Crisp Manufacturers Association) and Scientific & Regulatory Affair manager for ESA, told this site.

“In the UK, they have been working with the latest FSA guidance to ensure product safety, similarity of nutrient profiles and sustainability metrics, as well as consumer perceptions are all taken into account when sourcing alternatives, whilst also bearing in mind supply continuity.

“Members have also been working with their local/primary authorities throughout to agree plans to ensure labels remain compliant and any changes on ingredients are duly communicated to consumers.”

Maintaining sustainability and the health halo

Sunflower oil cinoby
Pic: GettyImages/cinoby

Sunflower oil has a high smoke point, which makes it a popular choice for the higher temperature processing by the food industry.

Vegetable oils have a fairly high smoke point, too, and don’t have a very strong taste, but rapeseed oil follows sunflower on the food industry’s wish-list. It has a stronger, more nutty flavour, it’s low in saturated fat and can be used at very high temperatures.

However, as FoodNavigator reported, an unintended consequence of substituting sunflower oil for another oil is that it could alter the nutritional profile of a product – and not always for the better.

In a statement released 1 June, FSA CEO Emily Miles said, “We recognise the current circumstances over the supply of oils for food products are challenging. That is why we have given the food industry time to sort out accurate labelling for food products where certain oils have been substituted.

“This approach is only being taken where  the risk of adverse reactions to the substitute oils is very low or negligible, and where the food business has shown they will be correcting the situation quickly.”

Oil's right at home

Smoke points of common culinary oils and fats (credit Benexia)
Credit: Benexia

The smoke point is a natural property of unrefined oils, reflecting its chemical composition. When an oil is heated past its smoke point – for example, around 160°C/320°F for high-quality extra-virgin olive oil – it generates toxic fumes and free radicals, which are extremely harmful and possibly carcinogenic.

The British Heart Foundation punts olive oil as a healthy source of fat, but it’s currently four times more expensive than sunflower, with a low smoke point. It’s also important to remember it contributes its own strong taste, depending on grade.

Flaxseed oil – or linseed oil – has a very low smoke point, so isn’t suitable for baking or cooking.

Cold-pressed chia oil – such as the non-GMO version produced by Benexia – is an excellent source of plant omega-3 ALA and can withstand high temps.

Clarified butter, like ghee, often has a fairly high smoke point, but has a high saturated fat content.

Coconut oil is higher in saturated fats than butter and has a relatively low smoke point – so handy for at-home baking.

Avocado oil is high in monosaturated ‘good’ fat, has a high smoke point and a mild creamy and buttery flavour, but it’s more expensive.

Sesame oil has a particularly strong flavour and a low smoke point.

Products like palm oil and soy have also come under increasing scrutiny in recent years over their role in deforestation.

ESA’s Emig said his sector very seldom uses palm oil these days, echoed by SACMA’s Curtis.

“UK savoury snack manufacturers moved away from palm oil and palm oil derivatives around 10-15 years ago for sustainability and health reasons, and there now minimal usage of it in the sector. There is also no indication they are planning to return to use of these ingredients at any point in the future,” ​added Curtis.

What might change the playing field is the bio-equivalent cultivate alternative made from fermented yeast, developed by British start-up Clean Food Group, as reported by our sister site FoodNavigator.

Domino effect: Cut waste and GSG emissions

Another new innovation is OLICO (Oxidative Lipid Inhibiting Cooking Oil), which, according to Canadian producer The Enezol Company, can help the food industry slash its carbon footprint by half.

David Massey, Enezol’s president, told BakeryandSnacks the eco-oil is suitable for all  sectors that use fryer oils, especially the snacks arena.

OLICO is the culmination of almost 20 years of dedicated research into all-natural oilseed processing and plant-based antioxidants.

“The key to OLICO’s performance resides in the unique oilseed extraction and natural purification process, coupled with a proprietary blend of naturally-sourced, vegan-based antioxidants that helps protect the oil from heat-induced degradation and oxidation,”​ said Massey.

The result is a high-functioning fryer oil that lasts two times longer on average than conventional fryer oils – even high-oleic oils – which means fryer oil consumption can be reduced by up to 50%, a claim backed up by extensive fryer testing carried out by the University of Tokyo at the behest of Enezol.

This, in turn, reduces GHG emissions. According to a March 2022 study from the University of Nottingham's Future Food Beacon, the carbon footprint to produce 1kg of a vegetable-based fry oil​ is similar to burning 1kg of diesel fuel. Therefore, reducing total deep fryer oil consumption by 50% effectively halves GHG emissions.

Questioning supply, Massey told us the Winnepeg-headquartered producer sources its primary oilseeds from Australia “as they are non-GMO.”

He added sunflower is “a real challenge right now, and we are working with our sourcing partners to find a way forward.”

And cost? “The price of OLICO is more than conventional oils,” ​said Massey.

“However, since total oil consumption is typically cut in half, there is a net financial savings of 20-30% for the customer by switching from conventional oils.”

Reformulation is becoming de riguer

According to FDF Scotland, the way forward is reformulation,​ be it a short-term solution to overcome the crashing load of challenges, or the longer-term move towards healthier offerings.

UK’s HFSS regulations timeline

October 2022: Instore laws remain applicable in England and Wales from October this year, banning HFSS products from ‘impulse’ areas such as checkouts or gondola ends. [Some exemptions do apply: stores that are smaller than 185.8m2 (2,000 square feet); speciality food stores that sell one type of product, such as chocolate; and businesses with less than 50 employees.]

October 2023: A veto on multi-buy deals on foods and drinks and restrictions on free refills for soft drinks will now be delayed for a year.

January 2024: The planned restrictions for banning HFSS being advertised on TV before 9pm and paid-for adverts online have also been pushed back and will come into force January 2024.

The onus on producers today is to reformulate their products to align with systems like the EU’s Nutri Score, the Nutrition Fact Label set by the FDA in the US, and the HFSS regulations, to be phased in stages in the UK starting from October. This is a daunting task for any producer – and particularly a smaller concern that doesn’t have access to a big budget.

Joanne Burns, Reformulation for Health manager, FDF Scotland, told this site that interest in fat reduction is growing, and today, ingredients specialists have come through with many innovative alternatives.

“Fibre and starch based ingredients, such as inulin and tapioca starch, can mimic the functionalities of fat in many products, while reducing the fat content,” ​said Burns.

“Each [unique] product will require its own fat reduction solution, but ingredient suppliers are well equipped to support food producers to find the best solution for their reformulation need.

“Food and Drink Federation’s Reformulation for Health Programme partners with multiple ingredients manufacturers and suppliers who can provide these solutions through our Reformul8 Partnership. We recognise that food producers cannot reformulate alone; a holistic approach across the whole food system is needed,” ​added Burns, noting one partner has developed a range of reduced fat products for the bakery industry, including pastry, margarine, and cake fat with a multitude of applications. The reduced fat products are simple to use with 1:1 replacement, 24% less fat, and is cheaper to buy. 

Support from FDF Scotland on all reformulation issues is free for Scottish SME manufacturers. 

Oil drop BlackJack 3D
Pic: GettyImages/BlackJack 3D

Study:

Vegetable oil emissions study reveals urgent need for greener growing solutions

Source: University of Nottingham

ScienceDaily, 21 March 2022

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