Coconut oil prices to stay bullish

By Dominique Patton

- Last updated on GMT

Related tags Coconut oil Petroleum Saturated fat

Coconut oil prices are set to stay high this year, pushing food
makers to look at innovative ways of reducing their costs.

Coconut oil, used in margarine, shortening, coffee whitener and popcorn, has hit record prices in recent weeks, driven by the global trend across vegetable oils. Strong demand in emerging economies as well as growing use to make biofuels is keeping supply tight. Yvonne Augustin, executive director of the United Coconut Associations of the Philippines, told "The vegetable oils market right now is really bullish. Coconut oil has spillover strength from this market." ​ The Philippines is the world's biggest coconut oil exporter, typically selling 70 - 80 percent of its coconut oil on the international market. But with the rising prices of palm oil, the country has kept more of its coconut oil to use domestically in cooking rather than importing high-priced palm oil from Malaysia or Indonesia. Coconut oil production also fell in the Philippines last year at the same time as the government brought a new biofuels act into force. It requires 2 percent of all diesel to be made with coconut-based biofuel within the next two years. These factors combined led to strong increases in coconut oil prices last year. The average price was $800 per tonne in November 2007 compared with just $536 at the same time the prior year. The highest CIF price offered for a nearby position on coconut oil recently reached $1620 per tonne. Indonesian output, the second biggest exporter, was higher last year but global stocks still remain low. High prices are expected to increase production this year but there is also rising demand from both the food industry and industrial users such as the surfactants sector and biofuels. The Jakarta-based Asia Pacific Coconut Community (APCC) expects demand in the EU and USA to increase by 4 per cent in the first half of 2008 to reach 1.3 million tonnes. In the EU, demand from the food industry is rising faster than the industrial sector, at a rate of 4 per cent each year. "We anticipate growing demand in the food industry because of trans fats,"​ said UCAP's Augustin. There is also high demand in China. APCC predicts the booming economy to import 13 per cent more than last year during the first six months of 2008 to 74,000 tonnes, mostly for use in food. As a result, Romulo Arancon, executive director of the APCC, expects prices to remain "unprecedently high for at least the next six months or even a full year".​ He said export prices out of Rotterdam would likely be in the range of $1,100 to $1,300 CIF over the next year.

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