Typhoon Haiyan, one of the biggest storms ever recorded, caused serious damage to the Philippines, one of the world’s top coconut oil producers, causing significant losses to coconut trees in the region.
Coconut oil prices were pushed up by as much as $240 by the disaster, with competing products such as palm oil also being elevated by the effect, according to analysis by news website The Malaysian Insider.
According to the paper, the event pushed palm kernel oil up by RM 150 per tonne. The typhoon has also reduced traded volume of coconut oil by almost 20%.
Coconut oil, which is used for a variety of cosmetics applications including intensive air conditioning, makeup remover and moisturizer, has recently begun to face competition from the more sustainable palm oil, which had previously fallen below the radar for most companies.
Analysts claim that the shortage of coconut oil could cause an increase in crude palm oil kernel prices as buyers look for substitutes.
Kenanga Investment Bank analyst Alan Lim was quoted as saying “Crude palm oil prices may increase up to RM2 800 by year-end if the supply damage turns out to be a full-blown crisis, and assuming 25% of Philippine coconut oil supply is damaged.”
He also commented that Malaysian palm oil producers would likely receive a positive impact due to the reduction of competition from coconut oil. Other traders based in the region noted that the typhoon was also likely to push up the prices of other competing vegetable oils as well.
Palm oil is increasingly being imported to be used by big players in the cosmetics industry, including Johnson & Johnson, Avon and L'Oreal. The effects of the typhoon are likely to drive up prices of the competing coconut oil, making it a more attractive proposition for companies.
A devastating impact
The FAO (Philippine Department of Agriculture) has stated that thousands of acres of coconut groves have been destroyed, thus damaging a major source of cosmetics oil produced in the region. Storage facilities and rural infrastructure have also been severely affected.
Thousands of acres of other rural crops, such as rice, have also been affected, with over a million farmers' livelihoods damaged by the disaster. The UN has suggested that up to 11 million people may be displaced by the damage and flooding.
José Graziano da Silva, the director general of the FAO, stated: "FAO will do everything within its means to support the Government of the Philippines in the reconstruction process and to build resilience. FAO has already mobilised $1 million of its own resources to respond to this tragic event and called for $24 million for immediate interventions in fisheries and agriculture as part of the UN-coordinated humanitarian Flash Appeal launched today. I call upon the international community to also support this process."