FILIPINO coconut farmers should brace for steeper declines in the price of copra as global coconut oil (CNO) prices are expected to plunge further this year due to the global vegetable oil glut.
In its Commodities Market Outlook for April, the World Bank projected that global CNO prices this year would average $720 per metric ton, 27.78 percent lower than the average of $997 per MT recorded last year.
The World Bank made the forecast following the global vegetable oil glut which is expected to persist in the short term as output “continues to look promising due to favorable growing conditions.”
“Global output of the 17 major edible oils [including palm, soybean and rapeseed, which together account for two-thirds of global output] is forecast to increase 2 percent in the 2018-19 season,” the World Bank said in the report, which was published on Wednesday.
“More than two-thirds of the production gains are projected to come from palm oil. Indonesia and Malaysia are the primary producers of palm oil, and both are experiencing favorable weather conditions,” it added.
Global CNO prices in the first quarter have declined by 42.41 percent to $721 per MT, from $1,252 per MT in the January-to-March period of 2018.
“The World Bank’s Oil and Meals Price Index remained broadly stable in the first quarter of 2019 but stands 14 percent lower than 2018 Q1,” World Bank said.
“Although there was price weakness across the board last year, it was more pronounced in coconut, palm kernel and palm oils, whose prices plunged by 42, 38, and 17 percent, respectively, from 2018 Q1 to 2019 Q1. Low prices reflect favorable harvests across all regions and, to a lesser extent, Chinese tariffs on soybean,” it added.
Lower copra prices
UNITED Coconut Associations of the Philippines (Ucap) Chairman Dean A. Lao Jr. said lower CNO prices would mean lower copra prices, as domestic quotations track the movement of prices in the international market.
The decline in CNO prices could also mean lower export receipts from the Philippines’s top agricultural export commodity.
“We are a low for [export] price and volume right now,” Lao told the BusinessMirror.
He said the “best intervention” for hiking copra prices is the increase in the coco methyl ester (CME) content in biodiesel to 5 percent from the current 2 percent.
“The best intervention for inclusive growth is increasing coco-biodiesel blend. That is the demand that would support price and encourage replanting. [And it] works for the environment, and improves vehicle mileage and
lowers emissions,” Lao added.
Philippine CNO exports in marketing year (MY) 2019-2020 may fall by 5 percent to 950,000 metric tons (MT) due to the persistent global vegetable oil glut and the anticipated drop in copra output.
The Global Agricultural Information Network report, which was prepared by the United States Department of Agriculture-Foreign Agricultural Service in Manila said CNO exports may decline by 50,000 MT, from the estimated 1 million metric tons in MY 2018-2019.
Recovery
NONETHELESS, the World Bank projected that global CNO prices would recover starting 2020 until 2030 on the heels of various external factors, such as higher energy and fertilizer prices, and the resolution of trade frictions among the biggest economies in the world.
However, World Bank projections show that average world CNO prices would only return to its usual above $1,000-per-MT level by 2030, when it is expected to reach $1,200 per MT.
The World Bank estimates global CNO prices to hit $754 per MT next year, $790 per MT in 2021, $828 per MT in 2022 and $951 per MT in 2025.
“Several risks underpin these forecasts: the direction of energy and fertilizer prices [both of which are key inputs to grains and oilseeds]; whether trade frictions are resolved; changes to domestic support policies; strengthening of the US dollar; and currency movements of major exporters of particular commodities,” it said.
“Other risks include adverse weather patterns, including the ongoing [weak] El Niño, and diversion of food commodities to biofuels,” it added.
The average farm-gate price of copra as of April 16 reached P13.07 per kilogram, 41.34 percent lower than the average quotation of P22.28 per kg last year, Philippine Coconut Authority data showed.