Soaring prices are changing the way people around the world eat

A customer buys grapes from a roadside vendor near Secunderabad railway station in Hyderabad, India, on March 23, 2022. PHOTO: BLOOMBERG

KUALA LUMPUR (BLOOMBERG) - In India, roadside restaurateurs are halving their oil palm 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, and pizzas for a more parsimonious sprinkle of pepperoni.

With the world economy already shackled by Covid-19-related shortages and now reeling from Russia's invasion of Ukraine, prices of basics such as bread, meat and cooking oil 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 head of South-east Asia at consultancy LMC International Julian Conway McGill, who added that "consumers will have to reduce their intake".

In households as well as in the food service 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 soya bean, 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.

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

"I am currently making 300 to 400 fried dumplings a day compared with about 1,000 pieces earlier," said Mr Sahoo.

"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 oil palm producer - output fell drastically due to a chronic labour shortage. Then drought decimated the canola crop in Canada and slashed the soya bean 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, soya bean, 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, Dr McGill said, and demand destruction may arise suddenly as companies use less oil or shrink their product size all at the same time.

For instance, the Organisation 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 150g instead of 200g, the current approved weight.

Bakers in Ivory Coast are seeking to cut the weight of a baguette because of the rising cost of wheat. PHOTO: AFP

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

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

It is not just crops. In Chicago and surrounding suburbs, Mr Joe Fontana owns the spicy-chicken restaurant Fry the Coop in five locations. Prices for chicken have been elevated since the coronavirus 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 (S$13.60). "You can charge customers only 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 will not be spared either. Pizzamakers might start to cut the pepperoni that gets placed on a pizza by half, Rabobank protein analyst Christine McCracken said. And that is not all.

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

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