Grain and Cooking Oil Shortage
Ukraine and Russia are the biggest suppliers of cooking oil. Since the war between Ukraine and Russia started, there has been intensified supply chain problems with food and other items. Both countries export around two-thirds of sunflower oil in the world.1 Since this supply chain has been disrupted, the US, UK, Indonesia, Germany, Netherlands, and India have faced significant difficulties locating sunflower and vegetable oils.2
According to the US Agriculture Department data, “thirty-five percent of the world’s production of vegetable oil is palm oil, 29 percent is soybean, 14 percent is canola, and 9 percent is sunflower oil.”3 Restaurants in the US do not heavily rely on palm oil, but experts say that when one supply experiences a disruption in the supply chain, this will create a ripple effect on other products in the market.
To get a head start on this crisis, retail stores in many parts of the world now limit how much cooking oil customers can buy, while some customers buy in bulk at warehouse stores. Since the disruption of this supply chain, cooking oil continues to increase in price over the price seen due to covid related supply disruption. Pricing will continue to increase as supply across the world cannot meet demand.
Grain Shortage
The war between Ukraine and Russia has also caused this grain shortage. Wheat and grain prices are soaring due to added inflation. As of right now, “US wheat prices are up 48% year to date.”4
From the UN Comtrade Database provided by Statista, Russia is the world’s largest wheat exporter, totaling 37.3m exports, and Ukraine exports 18.1m.5 This makes up around 28% of the world’s grain and wheat market.6 That said, Ukraine and Russia are the key players in the international wheat market.7
Russia has seized Ukraine’s ports, which has caused Ukraine to be unable to ship out wheat or other ingredients. The UN has also warned that this will cause a loss of 19 to 34 million tons of exports this year. The US Department of Agriculture has predicted that the total wheat production will soon decline in late 2022 or 2023.8. Those who have been most affected by this grain and oil shortage are restaurants.
How will this negatively affect restaurants?
An associate director at Datassential, a food market research firm, has found that 62% of US restaurants have bread or items that include wheat on their menus.9 Restaurants are already increasing menu items, but will they have to raise prices on more things on their menus or get creative with ingredients?
Some restaurant owners are becoming more creative with their menu and are either pulling away some menu items or introducing new menu items using the ingredients they already have in the kitchen. This helps boost revenue and increase marketing efforts toward the restaurant.
This is an evolving problem, and we will update the information each quarter into 2023.
Goliath Consulting Group is a restaurant consultancy group based in Atlanta, Georgia. For more information on our services, visit http://www.goliathconsulting.com or email us at getresults@goliathconsulting.com