Bullish Market of Coconut Oil in The First Half of 2021

          A considerable increase in the price of coconut oil (CNO) was observed in 2020. The price averaged at US$1,015/MT which was up from US$731/MT a year ago or an increase by 39%. The price was ranging from US$834/MT to US$1,463/MT with a price volatility of 35%. Like CNO, the price of Palm Kernel Oil (PKO) in 2020 also significantly increased by 25% to reach an average of US$ 827/MT as against US$662/MT in 2019. The price had an increasing trend at 3% per month and price volatility of 46%. The price ranged between US$678 and US$ 1,193/MT, CIF Rotterdam from January to December 2020. CNO had a premium price of 20% over the price of PKO in 2020. This makes CNO considerably more expensive than PKO causing a shift in demand at the expense of CNO.

            The demand for CNO in the US declined as the price premium of CNO over PKO widened. Shipment of CNO to the US in 2020 was 454,401 tons which were lower by 3.5% as opposed to the volume a year earlier. On the other hand, demand for PKO increased from 343,052 tons in 2019 to 381,105 tons in 2020 or leveled up by 11%. In total, the import demand for lauric oils by US buyers increased by more than 3%. The higher price of CNO has also caused lauric oil buyers in EU countries to purchase more PKO at the expense of CNO. In 2020, European countries bought 0.8 million tons of CNO, a reduction of 10% against 2019’s volume. Meanwhile, imports of PKO went up by10% from 0.75 million tons in 2019 to 0.82 million tons in 2020. Despite the price discrepancy between CNO and PKO in the world market, demand for lauric oils by Chinese buyers was significantly low. Lauric oils shipments to China dropped mainly due to the global Covid-19 outbreak which led to travel restrictions as well as shipping delays. Imports of CNO by Chinese buyers was 162,186 tons which lowered by 6% compared to the previous year’s volume. Shipments of PKO to China were even worse in 2020. China received only 742,424 tons of PKO or a reduction of more than 20% as opposed to 2019’s volume. Combined imports of lauric oils by China in 2020 suffered a setback by almost 0.2 million tons from 1.1 million tons to only 0.9 million tons or shrank by 18%, reflecting a reduction of stocks and consumption. However, China was still the biggest importing country of lauric oils in the world. Exports of coconut oil from Indonesia and the Philippines in 2020 declined following a price premium of CNO over PKO as well as a result of poor yields from previous dryness aggravated by typhoon damage, especially in the Philippines. The preliminary figure of coconut oil exports from the Philippines during January-December 2020 was 837,720 tons which dropped by 32% from 1.2 million tons for the same period a year earlier. Lower export performance was also perceived in Indonesia, the second-largest exporting country. In 2020, Indonesia shipped 557,059 tons of CNO to the global market. The export was lower than 2019’s volume at 610,812 tons or declined by 9%.

            The environment of the CNO market for the first half of 2021 is still expected to face some challenges due to the pandemic in supply, though it is most likely to experience a moderate recovery in the second half of the year. The Philippine coconut industry is playing catch-up amid delays and breaks in production, as companies struggle to get staff regularly and with enhanced Covid protection measures. Shipping will still be going to be the biggest challenge for most importers. Despite the challenges, the Philippines’ coconut oil is anticipated to recover by 14% to 1.1 million tons (Oil World). Likewise, coconut production in Indonesia is projected to modestly improve following expected better precipitation. Higher yield in 2021 is also projected in India. The Coconut Development Board of India estimated that coconut production will reach 21,487 million nuts or 2.46 million copra equivalent. Coconut Research Institute Sri Lanka forecasted that annual coconut production will increase by 19%. As a result, the export of coconut oil for 2021 is projected to go up by 4% to 1.92 million MT in copra terms from an estimated year-ago total at 1.86 million MT. However, a modest increase in supply is projected to happen in the second half of 2021.

          If the demand of CNO in 2021 is assumed to be stronger than last year’s volume, then there will be a shortage of export supply of CNO in the world market leading to drain off the CNO stock available in the market and supply from PKO as substitution oil. Prices of CNO are expected to increase as a result the import demand exceeds the export supply. It is noted that the price of CNO in Rotterdam for January 2021 increased at a significant rate of 38% over last year's price at US$1,086 per ton. The price of CNO will keep rallying for the coming months. One of the main factors that could reduce the accelerating price of CNO this year is a higher export supply of PKO both from Malaysia and Indonesia as main producing countries. The Oil World forecast that world PKO production to increase by 4% in Oct/Sept 2020/21. World exports are estimated to reach 3.6 million tons or level up by 0.2 million tons, mainly on account of larger volume from Indonesia. In conclusion, a bullish CNO market will be prevailed in the first half of 2021 due to an expected tight supply both in the Philippines and Indonesia. PKO as substitute oil for CNO, its additional production and export supply in 2021 is not enough to fulfill the demand-supply gap of CNO in the world market. Consequently, the price of CNO in 2021 will going to stay strong at least until the first half of 2021.

Table 1. Copra Production, 2019-2021 (million tons)













Other countries








Source: Oil World      p: projected figures