Putin and El Nino Threaten World Food, Will the Cooking Oil Crisis Repeat?

Illustration (Photo: Doc. Ministry of Finance)

JAKARTA – Russian President Vladimir Putin's reluctance to renew trade traffic agreements in the Black Sea this month has dire consequences for global supply chains.

In fact, before that the Kremlin allowed Ukraine to send wheat and other food commodities to various countries.

Due to these dynamics, world food security is under pressure.

This was conveyed by the Minister of Finance (Minister of Finance) Sri Mulyani during the Submission of Fiscal Incentives in Regional Inflation Control which was held today.

“In July Russia terminated the agreement for distribution in the Black Sea which is traffic from commodity trade. Until today Russia has not renewed the agreement to allow (traffic in the Black Sea)," she said, Monday, July 31.

Sri Mulyani explained that Ukraine is one of the world's producers of vegetable oil derived from sunflower seeds.

Therefore, if there is a disruption in the supply chain, the demand side will look for substitute goods to replace it, in this case, palm oil or crude palm oil (CPO).

As is known, Indonesia is the largest producer of palm oil. The turmoil that occurred in Eastern Europe had soared prices to a high of USD 1,733 per ton in 2022.

Even though prices have fallen, they are still relatively high compared to the pre-pandemic price tag.

"Ukraine and Russia because of the war, our CPO was also affected (prices went up). This explains why the cooking oil crisis occurred in early 2022 (due to high world demand)," she said.

Minister of Finance added that the challenges did not stop there. Currently, Indonesia and a number of countries in the world are faced with the El Nino phenomenon. The dry weather conditions identified as a potential threat to the agricultural and food plantation sectors.

"This means that the second half of 2023 will be affected by uncertainty from commodities, almost the same as in 2022. Plus there will also be challenges from El Nino, something we must be aware of," she stressed.