Restaurants face brunt of soybean oil shortageA low supply of soybeans from North and South America is causing a cooking oil shortage in Korea that’s expected to continue through this month.
Soybean oil is the oldest form of cooking oil used in Korea and still the most dominant kind used in restaurants because of its low cost. The soybean shortage, which has been ongoing for months, has raised the price of oil derived from the seed and dealt a critical blow to restaurants that usually buy their supply in 18-liter (5-gallon) cartons meant for business use.
The soybeans used to make oil mainly come from Argentina, Brazil and the United States. Last year, Argentina, the world’s third-largest supplier of beans, was hit by its worst flooding in decades. As Argentine bean prices soared, it became difficult for Korean companies to import soybeans and crude oil from Brazil and the United States due to increased global demand.
In response, Korean manufacturers of soybean oil began raising the price of their refined cooking oil, and some even stopped producing oil for business use. Daesang and Dongwon both suspended production of cooking oil for business use in December.
CJ CheilJedang, the top cooking oil manufacturer in terms of market share, plans to raise prices by 7 to 8 percent this month. The company buys soybeans and extracts their own crude oil, unlike most of its competitors who import crude. “Soybeans cost $395 per ton during last year’s third quarter, but they suddenly soared to $445 per ton in the fourth quarter,” said Lee Eun-young, a director at CJ CheilJedang. “Manufacturing costs went up 18 percent as a stronger dollar added to already high bean prices.”
The supply of crude soybean oil from the United States has increased this month, but the refined products have yet to reach the market, as the process of turning crude oil into cooking oil takes time. As a result, the supply issue on the restaurant end might not be sorted out within the month.
The small portion of crude soybean oil from Argentina that eventually did reach Korea is inferior in quality compared to previous years. The cooking oil that can be made from the same amount of soybeans has gone down 10 percent. Some beans had to be refined multiple times instead of once. This longer process led Korean manufacturers to raise the prices of cooking oil cartons used by businesses. Ottogi and Lotte Foods each recently raised their prices by 9 percent. In the wholesale market, 18-liter cooking oil cartons, which went for 24,000 won ($20), saw their price go up 12 percent to 27,000 won.
General consumers, though, are not likely to see much effect. “The most popular type of cooking oil for households is made of canola seeds, not soybeans, so there’s no immediate effect yet,” a source working in the food industry said. “But in the long term, cooking oil price hikes will eventually reach general consumers if the cheapest cooking oil product in the market [soybean oil] continues to get more expensive.”
The industry’s guess is that the cooking oil shortage will subside by early February, when products made from North American beans reach the market. Bean imports from Argentina will also increase next month. Daesang this month began importing crude soybean oil again after cutting its supply in October, said Park Chul-hong, a manager at the company.
Major fried chicken franchises like BBQ, Kyochon Chicken and BHC were able to avoid repercussions from the price increases by using other types of cooking oil like olive, canola and sunflower oil.
“We weren’t affected by the soybean oil shortage because we use olive oil only,” said Kwak Sung-kwon, a senior director at BBQ.
BY LEE HYUN-TAEK [email@example.com]
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