Global Demand for Coconut Oil May Exceed Exports, Producers Say

By Luzi Ann Javier

July 14 (Bloomberg) -- Global demand for coconut oil will exceed exports in the second half, boosting prices, as restaurant companies including McDonald's Corp. shift to trans-fat-free oils, according to a forecast from the biggest producers' group.

Demand from buyers including the U.S. may reach 1.58 million metric tons, while exports may total 1.01 million tons, according to the Asian and the Pacific Coconut Community, which comprises 15 exporting nations and accounts for about 90 percent of global output. Coconut oil is used in cooking and beauty creams.

Increased demand, partly spurred by health concerns, has boosted coconut oil prices 60 percent in the past year. So-called trans-fat oils, or vegetable oils like soybean oil which are treated with hydrogen to extend the shelf life of products like fried foods, have been linked to artery-clogging cholesterol, prompting some users to seek alternatives.

``The preference for tropical oils such as coconut oil and palm oil is increasing in the U.S. after the trans-fat issue has become a big health concern,'' Amrizal Idroes, a marketing officer at the community, said today in a phone interview. Idroes helped to draw up the group's forecasts for exports, demand and prices.

Coconut oil futures in Rotterdam, the global benchmark, may trade between $1,500 and $1,650 a ton in the second half compared with an average of $1,448 in the first six months, Idroes said from Jakarta.

The price in Rotterdam, a major destination for the commodity, was $1,485 a ton on July 11, said Idroes, who forecast in January that the oil would range from $1,200 to $1,300 in the first half.

U.S and China

U.S. coconut oil imports may rise 24 percent to 304,200 tons in the second half from a year ago, boosted by demand for trans- fat-free oils, Idroes said. China's imports may rise 89 percent to 122,500 tons in the second half as demand for food rises during the summer Olympic games, Idroes said.

McDonald's will complete a switch to trans-fat-free cooking oils at U.S. stores by the end of the year, Chief Executive Officer Jim Skinner said on May 22. Walt Disney Co., the world's largest theme-park operator, said last October, it was planning to phase out trans fats from food over the next two years.

The switches present ``an opportunity'' for coconut oil exporters, he said.

The monthly average opening inventory of coconut oil in Rotterdam fell 40 percent to 14,667 metric tons in the first six months of the year, from a year earlier, as demand outstripped production, Idroes said.

To contact the reporter for this story: Luzi Ann Javier in Manila at ljavier@bloomberg.net