3.1% hike in coco oil output seen

Production of coconut oil (CNO) is expected to slightly increase to 1.330 million metric tons (MT) this year from 1.314 million MT in 2005.

The United Coconut Associations of the Philippines (UCAP) said the rise in CNO production is due to the predicted rise in copra recovery from which CNO is extracted. UCAP said the benefits of the La Niña phenomenon will already be felt in the second semester until next year with coconut harvest increasing.

UCAP noted that rainfall during the second semester will be higher-than-normal, especially in Mindanao. Rainfall is estimated at almost normal to above normal levels to coconut producing provinces in the eastern seaboard of the country during the November-December seasonally dry period of the year.

Thus, export forecast for CNO in 2006 is seen to inch slightly by 3.1 percent compared to 2005.

UCAP said this projection took into account lower palm oil import, consequently reducing volume of displaced CNO for export, as well as expected slow down in copra importation for the year.

On the other hand, local demand for CNO will increase by 31.7 percent to about 358,000 MT. In 2005, consumption was about 270,000 MT, sliding by 30.7 percent from 2004 due to displacement by imported oil.

In addition, there has been significant increase for home-made oil/food nuts, from about 69,000 MT to 73,000 MT oil equivalent, the bulk of which represents nuts for virgin coconut oil

Danilo Coronacion, president and chief executive officer of the Coconut Industry Investment Fund Oil Mills Group, one of the country’s leading exporters of CNO, said the availability of CNO volume for export will hinge on the level of domestic demand for edible oil and other food nuts applications.

"The performance of these two sectors could provide latitude for additional volume for export," he said.

Global CNO production for the current year is placed at 3.159 million MT, lower than 3.181 million MT in 2005 as Indonesia is seen to fare poorly due to bad weather. Production will continue to be dominated by the Philippines which accounts for 80 to 85 percent of global CNO supply.

Coronacion said that as a result of the CNO shortage, prices are predicted to hit $700 per MT by yearend, a substantial increase from the current average of about $580 per MT CIF Rotterdam.

Global demand for CNO is driven by efforts to increase usage of bio-fuel such as bio-diesel from coconut, new oleochemical capacities in the Philppines, the emerging market for Southeast Asia in the personal care industry, and the growing demand of China and India.

Since January, CNO prices have steadily gone up, from $530-540 per MT in March, while April to May deliveries prices spiked to $580 to $600 per MT CIF Rotterdam.

As CNO prices appreciate, local copra prices also improved to P16 per kilo in recent months from P13 to P14 per kilo during the same period in 2005.