15/4/06 (Manila Bulletin)  -  The Philippines can take advantage of a soaring coconut oil (CNO) price in the world market that can reach to $ 700 per metric ton (MT) if only local copra production could rise at a stable, hefty rate, arresting the lamentably low usage of the country’s oil milling capacity.

Danilo M. Coronacion, president and chief executive officer of the CIIF Oil Milling Group (CIIFOMG), said several factors can dictate an ascend in the price of coconut oil in the world market.

Chief of these considerations is building up a market sentiment that believes on the Philippines’ supply reliability and its ability to sustain this on the long term.

With just 1.1 to 1.2 million MT CNO export yearly, the Philippines remains to be the world’s largest CNO exporter.

"You don’t have enough to supply the market globally which causes a declining confidence in our reliability to supply which affects pricing. International commodities trading is 50 percent fundamental and 50 percent market sentiment. Reliability, logistics, predictability, and sustainability are important," said Coronacion in an interview.

Because of low copra production of just 2.2-2.3 million MT yearly, the country’s oil milling capacity is down to just 50 percent.

"It has been stagnant at that level that’s why there’s a lot of excess milling capacity. In addition to this excess capacity, new oil mills are being set up in Mindanao and Bicol (at a combined rate of 90,000 MT per year). The result is very stiff competition," he said.

With reduced confidence, the tendency is for the market to shift to competing lauric oils like palm kernel oil (PKO), dampening demand for coconut oil that keeps price to stay at a low level currently at just 0 per MT, CIF Rotterdam.

Yet, Coronacion said CNO price is seen to go up to 0 to 0 per MT in June-July which can translate to a P15.50 to P16 per kilo copra price at millgate or P10 to P12 per kilo at farm-gate.


Aside from increased reliability of CNO supply, three other factors are important for CNO world market price to increase to 0 per MT, according to Coronacion.

The first is the establishment of a continuing biodiesel market (which goes with the demand for cheaper, renewable, and environment-friendly fuel) which will create demand for CNO.

The second is the completion by the second quarter of the additional 700,000 MT capacity for oleochemical (chemicals using CNO or PKO for manufacturing soap, detergents, personal care products). Additional capacities will come from the PHilippines (90,000 MT), Malaysia, Indonesia, India, and China that will create an additional demand for 700,000 MT of lauric oil (CNO and PKO).

The third is increasing demand for special fats (edible oil, shortening, margarine) in the Asian market specially in China.

Despite huge market opportunities in Asia, mainly China, and in the Middle East, the Philippines continues to supply CNO just to its traditional markets—US and Europe because of poor copra production.

The Philippines currently produces only 2.2 to 2.3 million MT of copra which at a rate of 63 percent converts to CNO of 1.6 to 1.7 million MT of which 350,000 to 400,000 MT is used locally.