World production of coconut oil (CNO) is expected to be lower this year as a result of a shortage in copra supply and coconut production, says Cocommunity in its May issue.

Copra (dried coconut kernel) production in the Philippines – the world’s top coconut oil producer – was expected to fall by 4.2% this year compared with 2015, mainly due to severe dryness. It was also expected to decline by 7.1% in Indonesia due to a long drought.

The fall in copra production was also attributable to competition for raw materials with other coconut products such as dessicated coconut and a sharp increase in exports of fresh coconut.

“Reduction in coconut lands, senility of trees and slow progress in replanting have also contributed to the drop in coconut production,” Cocommunity said.

World exports of coconut oil grew at an average annual growth rate of 10% in 2012-2014 but fell 4.9% year-on-year to 2.146M tonnes in 2014, and declined by 1% in 2015.

The Philippines’ CNO exports fell slightly from 856,972 tonnes in 2014 to 853,152 tonnes in 2015 as the country supplemented its copra shortage with imports of the commodity. Europe, USA and Japan were the Philippines main markets for CNO.

Exports from Indonesia, the world’s second largest CNO exporter – fell 1.6% from 771,419 tonnes in 2014 to 759,381 tonnes in 2015.

Prices of CNO have risen this year from US$1,150/tonne in Rotterdam in December 2015 to US$1,590 in April. The other lauric oil – palm kernel oil (PKO) – has moved in tandem with CNO, rising from US$832/tonne in December 2015 to US$1,307 in April.

“The significant PKO price increase has been narrowing the current unusually large price discount of PKO over CNO,” Cocommunity said. “The high premium price over PKO will restrain an increasing trend in the CNO price.”