Coco oil prices may hit $700/MT by yearend

Tight supply along with expanding demand by the oleochemical sector could raise global prices of coconut oil to about $700 per metric ton by yearend.

Danilo Coronacion, president and chief executive officer of CIIF Oil Mills Corp., one of the country’s biggest coconut oil exporters said the price rally in the first quarter will be sustained throughout the year due to continuing strong demand for coconut oil.

From January to March, coconut oil prices averaged $520 per MT CIF Rotterdam, while April-May delivery prices quotations were pegged at $580 per MT.

"There will be a persistent spike in prices, especially if new additional local oleochemical capacities will be on stream," said Coronacion.

He noted that two local companies, Pilpinas Kao and Pan Century will be expanding their operations this year and will require an additional 90,000 MT of copra or coconut meat from which coconut oil is extracted.

Coronacion said the emerging specialty market for personal care products, especially in the Southeast Asian region is also bringing up prices of coconut oil.

On the other hand, one of the Philippines’ biggest competitors in coconut oil production, Indonesia, is experiencing poor harvests due to unfavorable weather and this will result in a deficit of at least 100,000 MT in the global inventory.

Moreover, higher crude oil prices now threatening to pierce the $73 per barrel resistance level, is enhancing demand for biofuels like coco-biodiesel and ethanol.

Currently, the mandate for government-owned vehicles to use at least one percent biodiesel blend, requires production of at least 60 million liters of biodiesel.

"If all these favorable factors remain steady, then the price rally will be sustained and this will further encourage traders as well as coconut farmers," said Coronacion, adding that the strong demand is propping up copra farmgate prices at the P16 to P17 per kilo range.

The country is the world’s biggest coconut oil producer and exporter with average annual export revenues of $400 to $500 million.