What Is Coconut Oil

The price of coconut is not determined by the (demand for) oil alone now. In the case of coconut now there is widespread product diversification and coconut oil is only one of the products in determining the price of coconuts. So there is no meaning in introducing futures trade in the name of providing a stable price for coconut oil.

Beset a continuing local shortage, coconut oil substitutes are now being imported by industrial users to sustain their operations. According to BusinessWorld sources, feedmillers and oleochemical companies, which use coconut oil in the manufacture of chemicals used in the production of soaps and detergents, are already buying such substitutes as soybean oil and palm kernel oil to keep their plants running.

Soybean oil is used by feedmillers as a "binding" agent for livestock and poultry feeds, while palm kernel oil is used to produce chemicals DIlike fatty alcohols, fatty acids and glycerine for the manufacture of soap and detergent products.

An official of San Miguel Corp.'s (SMC) Agribusiness Unit told BusinessWorld they have already started importing soybean oil to sustain their feedmilling operations given the continuing shortage of coconut oil because of the lingering effects of last year's drought on the country's coconut trees.

Some users (of coconut oil) have started importing palm kernel oil and other vegetable oils because the price difference between coconut oil and the substitutes is already very large. Coconut oil now costs $ 140 more than substitutes - before, the difference was only $ 30.

An official of the Philippine Association of Feedmillers, Inc. confirmed that member firms have already started bringing in soybean oil to keep their plants running. Meanwhile, United Coconut Chemicals, Inc. (Cocochem), a subsidiary of the Coconut Industry Investment Fund, started importing palm kernel oil since the start of the year in small volumes and are now purchasing the commodity in bulk. "That's correct, we are now importing. We are doing this to keep our plants from shutting down because if that happens, we will have to lay off our people," a Cocochem official told BusinessWorld in a telephone interview.

Cocochem requires 6,000 MT of coconut oil a month for the manufacture of fatty alcohols, fatty acids and glycerine which are shipped to other countries. These chemicals are used in the manufacture of soaps and detergents. The source, who likewise requested anonymity, declined to cite how much palm kernel oil Cocochem has already brought in, but said they have been importing the commodity from Indonesia and Malaysia.