Bulk Coconut Oil

While use of bulk coconut oil in edible products is declining, its use in industrial and soap products is holding steady; although its growth is limited, the industrial market should hold the slump a little bit.

The market for coconut oil fatty acids is also reported to be static. There is a long-term term trend towards increased use of coconut and palm kernel oils in fatty alcohols, a source says, noting that two new US alcohol plants have been announced. However, neither will be on stream for two to three years.

Another factor in the recent slump is the low price and plentiful supply of palm kernel oil, which was quoted at 23 to 24 cents per pound last week. Fall is generally a peak production period for palm and palm kernel oils. Summer marks the peak for copra production, with Winter the slowest season for the coconut oil crush.

In what is probably only a temporary reversal of the downward trend of the last several months, coconut oil prices have rebounded in the last several weeks, in response to seasonal factors as well as the continuing run-up of soy oil futures on the Chicago Board of Trade.

"Prices were falling for months, though they seem to have firmed back up," a bemused broker states. He stresses, however, that negative market fundamentals are essentially unchanged worldwide.

Coconut oil prices had struck a bottom of 14 1/2 cents per pound for nearby supplies c.i.f. New Orleans, but eventually worked back up to 16 1/2 cents. June/July shipments of oil are now trading at 17 cents per pound.

One trader attributes the reversal to seasonal holidays which traditionally shut down production and processing in producing countries. Both Indonesia and Malaysia came to a virtual standstill because of Moslem holidays which ended last week, he says. And the Philippines, another major producer, closed down for about a week during Easter celebrations.

Another source directs attention to the rising price of soy oil on the futures market. Coconut oil has historically been heavily influenced by shifts in the soy oil markets, he explains, though in recent months the tropical oil has not seemed to be affected.

While soy oil values have been rallying since early February, coconut oil prices have been moving in the opposite direction. But now, he reasons, coconut oil has begun responding to soy oil's advance. Still, bean oil is trading at a hefty 600 to 700 point premium to coconut oil, though traditionally coconut oil sells at a several hundred point premium to soy.