Why edible oils are bearing the brunt of food inflation

The FAO's vegetable oils index reached 198.6 points in September 2025, marking an 18.3% increase over the previous month and the all-time high since June 2022. This surge in vegetable oil prices is attributed to a combination of factors, including war, El Niño, and national biofuel mandates. About 25% of the global production of soyabean oil, 28% of palm oil, and 29% of rapeseed oil is used in the production of biodiesel or FAME.

National biofuel mandates, such as Indonesia's mandatory B50 blending of palm oil-based FAME in diesel, have increased the domestic demand for vegetable oils. If Indonesia's palm oil production dips by 3.8 million tonnes from 2026 to 2027 due to biodiesel conversion, the country's exports could fall from 32.3 million tonnes in 2025 to 26.5 million tonnes in 2027.

Russia and Ukraine, two leading sunflower producers, are expected to increase their oil production in the 2026-27 season. However, their exports may face logistical constraints due to port infrastructure damage and suspension. The war and El Niño weather conditions are further exacerbating the situation, leading to a renewed price flare-up in global vegetable oil prices.