Preview: Coconut and Its Development

The price of coconut oil, which often behaves like a yo-yo, is surging upward again despite the end of the recent drought in the Philippines. Barely six months ago, the versatile oil, rich in C[8]-C[16] fatty-acid fractions, but predominately C[12] (lauric acid), was moving for 21 cents/lb at Pacific Coast ports, the lowest price in seven years. Since then the tab has skyrocketed to 32 cents/lb and "indications are that the price could reach 35 cents/lb next year," says a major West Coast vegetable oil processor.

Despite the advent over the past two decades of synthetic fatty alcohols produced by Conoco, Shell and Ethyl, coconut oil has remained an important feedstock for chemical specialty manufacturers, especially for coconut cures. That is especially so where lauric acid, rather than lauryl alcohol, is required, since synthetic fatty acids are not commercially viable.

Until the 2003-04 crop year, chemical industry consumption of coconut oil had hovered about the 200-million-lb/year level. But last year, inedible uses, almost exclusively chemical, exceeded 410 million lb while edible uses totaled 338 million lb. The soap industry takes about 22% of total demand while fatty acid production requires 13%. Another 19% is consumed in the production of fatty alcohols, plastics and miscellaneous chemicals.

The momentum in coconut-oil price increases, despite last month's heavy rains, reflects several factors. The drought, which began in October, will cut oil production by 20%, to 1.7 million tons3. The United Coconut Assn. of the Philippines (UCAP), a federation of private businessmen, estimates the shortfall will range between 5.5% and 19%. In any event, there is little danger of a default on export commitments, since only half of the normal 150,000 tons of oil inventories have been drawn down.

In the U.S., oil importers see longer-lasting effects from the drought. This is so because copra processors on Mindanao rely on hydroelectric power and raising reservoir water levels will take at least 2-3 months. Moreover, copra output through February is expected to have less oil content. No permanent damage, however, has been done and production is expected to be normal by late spring.

To assure future supplies for coconut cures, the Philippine Coconut Authority is replacing old, low-yield trees with new hybrids that improve coconut harvests three-to-four fold. The effect of the new plantings, however, will not be felt before the late 2008.