Coconut Oil Prices Slide a Slippery Slope, But Will It Last?

Spend Matters welcomes another guest post from Sam Parry of Mintec.

The price of coconut oil in the US is currently down 40% year-on-year. Prices declined in 2012 due to heavy competition from palm kernel oil, whose price has been low as a result of high production. Global palm kernel oil production for 2012/13 is estimated to reach 6.2 million tons, an increase of 6% year-on-year. This has been led by a rise in production from the world’s largest producer, Indonesia, where output for the 2012/13 season is expected to increase by 8% year-on-year to 3.2 million tons.

 Lauric oils

Global production of coconut oil has also been relatively high. This is because coconut trees have benefited from favorable weather in Southeast Asia, where the bulk of coconut oil production takes place. The Philippines are the world’s largest producer, accounting for approximately 43% of global production, followed by Indonesia (27%) and India (13%). Global coconut oil production for 2012/13 is estimated at 3.6 million tons, an increase of 1% year-on-year.

Coconut oil is used in many different ways. Not only is it widely used as cooking oil and in making margarine, it is also a common ingredient in confectionery such as popcorn. In addition, coconut oil is found in many non-food products such as shampoos, soaps, cosmetics and detergents. Palm kernel oil has very similar properties to coconut oil and can be used as a substitute in many products. The two are known as lauric oils.

Lauric oil prices are expected to recover over the next few months, supported by firm industrial demand and low global ending stocks which are expected to reach their lowest level since 2006/07. A seasonal dip in palm kernel oil production will further support prices. So lather up your shampoo, prepare your popcorn and stock up on soap as these current low coconut oil prices may not be around for much longer.

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