Coconut oil exports by the Philippines is expected to remain weak in 2015 due to the lingering impact of typhoons and a pest attack, while a slow pace of replanting means supply will take at least five years to recover. Continued low shipments by the top exporter, which has already seen sales drop around 20 percent from levels before the crop-damaging Super Typhoon Haiyan in 2013, should underpin prices of coconut oil and rival palm kernel oil.
Coconut oil exports may hit 804,000 tonnes in 2015, the United Coconut Associations of the Philippines (UCAP) said. That would be above 794,000 tonnes shipped in 2014, but lower than a 2009-2013 annual average of 990,000 tonnes before Haiyan - one of the strongest storms to make landfall ever - uprooted millions of coconut trees in central Philippines.
"More buyers may shift to palm kernel oil if they see a wider price gap between the two commodities," industry group UCAP's executive director, Yvonne Agustin, told Reuters. Last year, tight coconut oil supply drove prices up nearly 50 percent to a weighted average $1,307.59 per tonne, UCAP said, ending with a premium of $239.90 per tonne over palm kernel oil.
"It will remain a bullish market but not as bullish as we hope it would be because of competition from palm kernel oil," said Jesus Lim Arranza, president of the Coconut Oil Refiners Association in the Philippines. A Malaysia-based palm oil trader who traded a little of palm kernel oil, however, believes the market has already priced in coconut oil supply constraints after Haiyan. "It was already priced in six months ago," the trader said on the sidelines of an industry meet in Kuala Lumpur.
Still reeling from Haiyan's wrath, coconut plantations in the Philippines suffered another setback last year from insect infestation and more typhoons. The government has undertaken replanting programme, but only 20 percent of the target has been met due to shortage of seedlings, according to the Philippine Coconut Authority (PCA), the state agency overseeing the country's coconut industry.
Even if the replanting of 16 million trees was done, it would take five to six more years before the trees become productive, analysts said. "We have to work double time," PCA Chairman Francis Pangilinan said. "We hope to be able to complete maybe more than half (of the target) by the end of the year."