MARKET REVIEW OF COCONUT OIL

September 2018

In Rotterdam, price of the two lauric oils dropped to a low level of US$907/MT for coconut oil and US$904/MT for palm kernel oil in August 2018. Price of coconut oil reflected a year-on-year drop by 43% and was recorded the lowest since 2013. Meanwhile, palm kernel oil price reduced by 28% since January 2018. Price premium of coconut oil over palm kernel oil shrank to only US$3 in August 2018 which was sharp drop compared to the last year’s price premium at US$439. The wide price premium over palm kernel oil certainly put pressure on the price of coconut oil. The wide gap between the two lauric oils also contributed toward a shifting demand of the oils at the expense of coconut oil in the last few years.

Coconut production is estimated to regain following recovery in rainfall pattern especially in Southeast Asian countries. Philippine coconut production in 2018, according to UCAP forecast, is expected to increase by 8.7% at 2.607 million tons compared to 2.399 million tons in copra terms in the previous year. The figure is 11.7% above the five-year average (2013-17) at 2.333 million tons and crossed the 2.5 million tons mark again after five years. Coconut production in Indonesia is also estimated to rise by 3.7% at 2.889 million tons copra equivalent in 2018 against 2.787 million tons in 2017. Meanwhile, Coconut Research Institute of Sri Lanka forecasted coconut yield for the year 2018 will be at 2,947.4 million nuts and this is about 20.3 % increase (497.4 million nuts) with respect to the estimated Annual National Coconut Production (ANCP) for the year 2017 (2,450 million nuts).

Production recovery of coconut pushes copra production to increase. The Oil World indicates that the global copra production in 2018 is expected to reach 4.58 million tons or grows by 15% as opposed to the previous year’s production at 3.98 million tons for the same period. Copra production in Philippines is estimated to increase by 22.6% to the level of 1.68 million tons this year. Indonesia is also projected to have higher copra production of 1.35 million tons compared to 1.16 million tons in the previous year. Copra production started to recover following an increase in nuts production as a result of favorable weather despite rising demand for coconuts for other uses. Export of desiccated coconut from Philippines leveled up by 21% to 115,005 tons during the period of January-December 2017. Exports of desiccated coconut from Indonesia rose as well to 98,038 or increased by 19% compared to the same period last year.

Following the recovery of copra production, global market of coconut oil in 2018 is expected to strengthen. Global import of coconut oil is estimated to increase by 12% in 2018 and hold back the previous negative trends. Latest figure shows that global import of coconut oil from January to June 2018 was 0.96 million tons which was higher by 14.3% opposed to 0.84 million tons of previous year’s export for the same period. In the period, Indonesian export of the product was recorded to improve by 30% against the previous year’s volume. Export of coconut oil from Indonesia in the first half of 2018 was 391,657 tons against 301,197 tons of first half of 2017. While the supply of coconut oil from Indonesia is rising, Philippines’ export of coconut oil from January to May 2018 declined to by 18% opposed to the last year’s export volume for the same period. Philippine Statistics Authority recorded that the export volume in the period was 337,793 tons.

Taking advantage of a low price, import demand of coconut oil is expected to grow from 1.59 million MT in 2017 to 1.82 million MT in 2018.  At the same time import of palm kernel oil is, similarly, estimated to scale up from 3.21 million tons to 3.43 million tons. As a result, total imports of lauric oils amounted to 5.25 million tons or increased by 9.4% opposed to 4.8 million tons of 2017.

Imports of coconut oil by US, the largest importing country, during January July 2018 was 304,252 tons which increased by 9.1% opposed to the last year volume for the same period. This is a signal of reverse trend in coconut oil consumption in the U.S. It is worth noting that coconut oil annual  demand  for  coconut  oil dropped in the last four consecutive years from 561 thousand tons in 2013 to 435 thousand tons in 2017, the lowest volume in last decade. The downtrend of coconut oil import by the US is also indicating a shift in preference of the lauric oils at the expense of coconut oil. In the same period, United States Census Bureau records that imports of palm kernel oil jumped. The oil rocketed from 374 thousand tons in January-December 2016 to 517 tons in 2017. Imports of palm kernel oil in 2017 is recorded as the highest in the last six years. Hence, share of coconut oil to the US total imports of lauric oils dropped to 45.7% from 58% in the corresponding period of 2016.

The uptrend demand for coconut oil was also perceived in Europe. In the period of January-May 2018, import of coconut oil reached 362,747 tons or increased by 8.4% compared to the last year’s volume. It should be noted that share of coconut oil to the European total imports of lauric oils reduced to 44% in 2017 due to high price premium over palm kernel oil. Taking into account current low price premium, share of coconut oil is expected to regain in 2018.