Crisps face monster price crunch

Prices of potato crisps, margarine, bakery goods, frozen chips and other foods are set to jump, due to massive price increases in a key ingredient.

The cost of sunflower oil has risen to at least a 20-year high and looks likely to climb higher, because of poor growing weather in Europe this summer. Heat across the continent has cut sunflower yields in top producers Ukraine and Russia, as well as Greece, Italy, Romania, Bulgaria and Turkey. Southern hemisphere producers, Argentina and South Africa, have also harvested smaller sunflower crops.

The price of refined sunflower oil in the UK jumped to £680 a tonne on Wednesday from what was already a seven-year high of £625 a tonne the day before.

Ironically, many food manufacturers have switched to sunflower oil because the cost of rapeseed oil has been driven up by the rapidly emerging biofuels industry. Rapeseed oil is used as a raw material for biodiesel, which is used in cars and lorries instead of diesel.

Prices of other oils such as soya and palm are already trading at record or near-record levels and could be pushed higher by the latest rise in sunflower oil prices. Major food companies that have already lifted prices because of the greater cost of edible oils could be forced to raise them further. Sunflower oil is also one of the most popular cooking oils in the home.

"It's come as a real shock," commented one of the UK's top traders of sunflower oil. "I think the sunflower oil market has some way to go before prices come down again because supplies still seem short."

Ian Hart, Editor of The Public Ledger, a commodities newspaper that was first published in London in 1760, added: "This week's surge in sunflower oil prices was unprecedented and took the trade completely by surprise. The rising quantities of edible oils that are being used to make biodiesel in the EU means that prices are that much more susceptible to weather shocks."