KUALA LUMPUR (BLOOMBERG) – In India, roadside restaurateurs are halving their palm oil use and moving into steamed snacks. Bakers in Ivory Coast want to cut the size of their standard baguette. Sandwiches from fast-food stalls in the United States are headed for fewer slices of bacon, pizzas for a more parsimonious sprinkle of pepperoni.

With the world economy already shackled by Covid-related shortages and now reeling from Russia’s invasion of Ukraine, prices of such basics as bread, meat and cooking oils have jumped across the world, sending shock waves through the commodity markets and damaging the global food system.

For the most vulnerable societies – think Yemen, which imports 90 per cent of its food in the midst of a grinding conflict and depreciating currency – this poses a genuine risk of hunger. Elsewhere, it triggers worries about what economists call demand destruction, a phenomenon when goods get too pricey to purchase.

“The cupboards are bare,” said Julian Conway McGill, head of South East Asia at consultancy LMC International, “and consumers will have to reduce their intake.”

In households as well as in the food-services industry, vegetable oils have become indispensable, used for deep-frying instant noodles, making cakes moist and giving pastries their flaky texture.

Exporters were already grappling with labour shortages and bad weather. The attack on Ukraine further roiled global crop trading and sent prices of the two most common oils, palm and soybean, to records. Governments are starting to step in, curbing exports, controlling prices and coming down hard on hoarders. But as higher costs seep through to grocery bills and with festivals in Asia fast approaching, consumers are being forced to scale back.

Raju Sahoo, a 48-year-old roadside restaurant operator in the eastern Indian state of Odisha, has halved his daily palm oil purchases to 15 kilograms by selling fewer fried snacks and switching to more steamed foods.

“I am currently making 300 to 400 fried dumplings a day compared with about 1,000 pieces earlier,” Mr Sahoo said. “I have started making idlis and upma to give more options to my customers,” he added, referring to steamed rice cakes and semolina, popular breakfast dishes.

Cooking oil shortages have been worsening since last year. In Malaysia – the world’s number two palm oil producer – output fell drastically due to a chronic labor shortage. Then drought decimated the canola crop in Canada and slashed the soybean harvests in Brazil and Argentina. Buyers were counting on filling in with sunflower oil from Ukraine and Russia, which together make up about 75 per cent of the world’s exports. The invasion ended that possibility.

The market reacted swiftly. Prices of the four major cooking oils – palm, soybean, rapeseed and sunflower – soared, and the rally is set to cascade down to shoppers in the form of higher costs for everything from candy to chocolate.

Sub-Saharan Africa and South Asia face the likelihood of heightened poverty, LMC’s McGill added, and demand destruction may arise suddenly as companies use less oil or shrink their product size all at the same time.

For instance, the Organization of Bakery Employers in Ivory Coast is seeking to cut the weight of a baguette, whose price is fixed by law, because of the rising cost of wheat due to the Ukraine war. It suggests 150 instead of 200 grams, the current approved weigh.

The war is also exacerbating a record surge in fertiliser prices, which will only make food more expensive. Brazilian farmer Zilto Donadello plans to cut fertiliser applications 30 per cent to 50 per cent in the next soybean crop, likely resulting in lower yields on his 400-hectare-farm in northern Mato Grosso in the agriculture heartland of the world’s biggest soybean producer.

“Risks are very high for a tiny margin,” Mr Donadello said.

It’s not just crops. In Chicago and surrounding suburbs, Joe Fontana owns five locations of the spicy-chicken restaurant Fry the Coop. Prices for chicken have been elevated since the pandemic closed meatpacking plants two years ago. Now, drought in Brazil plus war in Ukraine have boosted feed prices, pushing up chicken costs even more.

Mr Fontana has raised prices for his chicken sandwiches a few times already and more increases are planned, putting them above US$10. “You can only charge customers a certain price when it’s fast casual,” he said. “My fear is that it’s going to get to a point where it’s the US$15 sandwich.”

Other favourite dishes won’t be spared either. Pizza makers might start to cut the pepperoni that gets placed on a pizza by half, Rabobank protein analyst Christine McCracken said. And that’s not all.

“Keep watching bacon,” she said. “You’ll start to see food service take one strip off the sandwich.”

Source: https://www.straitstimes.com/business/economy/soaring-prices-are-changing-the-way-people-around-the-world-eat