The Reserve Bank of Zimbabwe (RBZ) says it expects the prices of edible oil, a major household commodity, to fall in tandem with the rapidly declining global prices of the key raw material, crude cooking oil.
Domestic prices of the household commodity have seen exponential rise since October last year, from about $245 to over $400 for a 2 litre bottle, after global prices shot up more than 100 percent.
But prices of crude cooking oil have started dropping as global demand weakened due to the impact of Covid-19. After global economies and companies took a hit from Covid-19, consumer incomes got squashed.
Edible oil prices hit record highs in the past 12 months due to lower output in major producers; Indonesia, Malaysia, Argentina, Ukraine and Russia while growing use of the commodity in biofuels has also squeezed supply.
Production of palm oil, the world’s largest source of crude cooking oil, went down in Malaysia due to labour shortages while bio-fuel mandates in key producers Indonesia and Malaysia also restricted global supplies.
Dryer weather affected soya production in one of the world’s largest soya oil producers, Argentina, while higher demand from the two biggest consumers, India and China, also spurred prices.
“The prices of crude cooking oil have since gone down on the international markets, this is good for local prices,”
Dr Mangudya said, adding the global price fall by nearly 20 percent, reduces demand for forex by expressers who import crude cooking oil.
Following the global price increase, cooking oil producers, who import crude cooking oil for refining, have been lobbying authorities to increase allocations from the auction to US$20 million monthly.
Edible oils producer said recently they needed more forex to maintain current production levels and meet demand after prices of crude cooking oil, shot up more than 100 percent on the global market.
Without access to more forex, producers warned of a potential supply deficit. While the fall is yet to match the price rise, it offers some respite to consumers amid strained incomes due to Covid-19.
Resorting to getting foreign currency at higher rates on open market could further push the final price of the product, a basic commodity for every household, to the consumer.
Zimbabwe is facing an acute shortage of soya beans and recently criminalised its side marketing by farmers and middlemen.
As a controlled commodity, soya beans can now only be sold to the Grain Marketing Board or a licensed contractor. Prescribed quantities may not be transported without authority from GMB.
Such is the gravity of the situation that soya beans exports from Zimbabwe have also been banned.
In terms of the law, anyone found in violation of the new trade regulations face a fine three times the value side marketed and possible jail term of up to two years if they are convicted.
Under the new laws farmers should not store or transport above 100 kilogrammes without permission from the GMB.
The fact that Zimbabwe produced only 51 000 metric tonnes over the last five years against demand of 241 000 tonnes, illustrates the magnitude of the current deficit of the crop.
Zimbabwe faces a serious forex challenge, due to weak economy after nearly two decades of sustained economic meltdown.
This explains why it uses a special auction to allocate forex for imports only on a priority basis, to key areas.
Since the global price shot up, oil expressers said they now required US$20 million, double about US$10 million they were receiving from the auction market to meet demand.
Industry players said the international prices for crude cooking oil, which is imported and refined in Zimbabwe, had jumped from 30 US cents to 69 US cents on the Chicago Board of Trade.