How falling oil prices could impact South Africa’s HoReCa sector

Photo by Fulvio Ciccolo on Unsplash

According to the US Department of Agriculture's Economic Research Service, while overall oil prices are expected to dip, prices for fats and oils could rise by 0.6% in 2025. Their forecast range spans from a 4.4% decrease to a 5.9% increase, underscoring the market’s volatility.

Factors such as crop yields, global production deficits, and processing constraints are increasingly playing a bigger role than crude oil prices alone.

And while this may seems too far removed from what happens in the kitchen – the ripple effect of oil prices, supply chain and quality is being felt. However, for South Africa, this presents both a warning and an opportunity.

The fluctuating oil price consequence

Crude oil prices took a dive to 2021 levels which is a direct impact of the current trade wars and fluctuating demand.

While this brings temporary financial relief for consumers and businesses with cheaper imported oils being more accessible to South Africa, a hefty impact will be felt by local cooking oil producers who are struggling to compete with low prices.

Morne Botes, commercial director at Southern Soil. Image supplied

Take the HoReCa sector for example, in order to maintain years of credibility, food safety and quality produced in the kitchen in line with the history of the business, the use of low-grade oils can have a negative impact on the businesses and its reputation.

Imported oils, while they solve the immediate problem of cost, often lack transparency in terms of sourcing and quality control.

On the other hand, palm oil exports have dropped significantly below the record volume exported six years ago, with production challenges including disease outbreaks like ganoderma fungus pushing up costs.

At the same time, demand for higher-quality oils like canola is shifting due to political tensions and trade disputes among major producers like Canada, China, and the US

This dynamic is making South African producers more vulnerable, as imports outpace local demand and threaten industry viability.

Cheaper Oils – what you should know

Unfortunately, not all cooking oils are made the same and are not upheld to the same quality and sustainability standards, especially those of the country they are being imported into. As a result, this has an impact on several things:

• Retailers may unknowingly stock lower-quality products, which can compromise food safety and brand trust.
  
• Supply chains become more fragile, dependent on volatile global markets and foreign policy shifts, which we are currently experiencing because of climate change and the current trade tariff war.
  
• Local sustainability initiatives are undermined by cheaper but environmentally damaging options. Take South Africa for example, there is a growing push toward ethical sourcing and environmentally conscious consumerism.

Furthermore, soybean oil consumption is being revised downward globally, even as crushing activity increases in countries like Argentina, revealing deep market imbalances that could affect long-term oil quality and availability.

In fact, for businesses that rely on cooking oil, like Canola play towards a business strategy that values sustainable spending. It’s high smoke point, neutral taste, shelf life and cost-effectiveness - make it perfect for high-volume, professional kitchens.

Food services in the crosshairs

These challenges, coupled with inflation can play a huge role in forcing the HoRecA sector and food manufacturers to opt for cheaper oils as a way to manage the high costs and meet the various demands of food services business.

While this solves one problem, it has a hidden cost on health, taste, reputation, and reliability – which is often far more detrimental to the business as opposed to saving money.

In fact, the US biofuel industry's crisis due to reduced oil imports has already shown how volatile policy decisions can disrupt feedstock flows and create artificial shortages. For South Africa, overreliance on imports could place similar pressure on the local market if global supply chains tighten unexpectedly.

The 3S’s - Smart, Sustainable, and Strategic

It is clear that supporting the local cooking oil industry is a smart business move. Local producers:

• Deliver oils that meet rigorous quality and safety standards.
  
• Contribute to the national economy and create jobs across the agriculture and manufacturing sectors.
  
• Help build food system resilience in a world where global economic and environmental uncertainties dominate frequently.
  
• The homegrown oils route also allows businesses to promote sustainable farming practices and reduce their carbon footprint. This option removes the risk of unpredictable price swings, trade wars, and supply shortages.

The question we must ask is, amidst all the uncertainty, will the South African HoReCa sector chase short-term gains or invest in long-term stability?

Choosing high-quality, locally produced cooking oil isn’t just good for business - it’s vital for the health, sustainability, and future of the nation’s food economy.