Palm oil ban to adversely affect non-food sectors

2 december 2015 | "Kompaniya"

One of predicted adverse effects of a ban on imports of dairy products is an increase in palm oil deliveries to the Russian domestic market. Figures speak for themselves: in January-September 2015 imports of this product rose by 31.7% compared to the same period last year.

Roman Titov
Roman Titov
Department for Expert Analytics

‘Experts use this fact to explain the ongoing volume growth of adulterated dairy products. The same argument is used by proponents of the palm oil imports ban on the territory of Russia,’ said Roman Titov, the expert of the Analytical Center, commenting on the situation to ‘Kompaniya’.

After the introduction of the food embargo the materials sector of the dairy market was not ready to sharply increased demands of processing. The overall production of ready dairy products and increase in production of raw milk were incomparable. Using the palm raw can partly explain a jerk, for example, in the cheeses segment, where in first nine months of this year, production grew by 23.8% (+84 600 t). In addition, other milk products are growing, too: sour cream - by 7.9%, butter - by 5.4%.

Although the shortage of raw materials in the dairy market could partly be compensated for by palm oil, reliable estimates of the substitution scale are quite difficult to be made due to the broad scope of its application (for example, in the cosmetics industry, in the manufacturing of confectionery products), according to Mr Titov. In addition, the increase of production of ready products is associated with redirecting raw materials from other dairy products - for example, in first nine months of 2015 production of the milk powder decreased by 15%..

The palm oil use ban in the food industry is likely to lead to its replacement by other components, besides the palm oil ban may affect other sectors in which palm oil is actively used, considers the expert.

‘Even if we manage to completely eliminate adulteration, it will lead to a new jump in consumer prices and, ultimately, to a reduction of the dairy market in the medium term. One of the control measures over the market may become a significant toughening of penalties for the non-compliance of the label information to the real contents. In this case, the adulteration volume will be reduced due to a transition of adulterated milk products in the category of milk-containing products, and the market in general will do without shocks,’ summed up Mr Titov.