The financial instability in US and European markets is helping to drive down prices of fats and oils, with bakers urged to start shopping around for deals.

Consultant Eccleso’s monthly market report on edible oils reveals prices have dropped by up to 20% since January, helped by falling mineral oil prices, which have a knock-on effect on vegetable oils, and general falls in market values.

According to Eccleso, crude palm oil prices have fallen from 950 in January to around 740 earlier this month, while sunflower oil has fallen from 1,100 to around 900. Soyabean and rapeseed oil saw declines of 13% and 20% respectively.

“Since 2003-4, there have been some heavyweight moves by hedge funds and speculators into commodities, which are therefore much less linked to what is happening with harvests and crops than they used to be. At present the markets are being led by fear and are behaving with a herd instinct, which is driving prices down both in crude oil and edible oils,” said Eccleso’s MD Gordon Kirkwood.

“Big industrial bakers will negotiate directly with manufacturers, but smaller bakers don’t have a great deal of leverage. Some of their suppliers may have bought a contract earlier in the year to cover their requirements for 12 months, so it will be some time before they can take advantage of lower prices. For bakers, it is worth shopping around to see if they can get better deals.”

BFP Wholesale MD Nick Harris said that pricing was being affected by currency exchange rate fluctuations. “The euro was 1.21 to the pound at the start of the year, but fell to around 1.08 and is now around 1.15. We’ve seen prices rise, although there has been some easing in recent weeks. It’s too early to say if and when that will feed through.”