Market Wrap Up December 2022

2022 has been a bumpy year for edible oils and desiccated coconut.

Coconut oil hit highs in February at over $2,300 CIF Rotterdam before hitting a low of just over $1,000 in October. This is a fall of nearly 60% in just 8 months.

Desiccated prices have tracked that of coconut oil, falling from highs around $2,800 FOB in February to just $1,400 in December.

But maybe one of the biggest tales in 2022 has been the fall away in demand for desiccated coconut.

Spoiling interest rates and inflation have culled consumer demand like never before. A recession looms, maybe like one we have never experienced before, where we have high-interest rates, high inflation, and high employment. The bubble is looking set to burst, and it seems governments are at a loss to help. On top of this, China’s zero COVID policy has also not helped.

On top of the drop in demand, the plentiful supply with more mills than ever before has caused big price falls across the Oils and Desiccated.

Ocean freight has also seen big falls from a year opening of around $18,000 for a 40ft FCL to December seeing spot offers at just $1800.

What next then for 2023?

Retail sales are expected to continue to decline as major economies entering into recession. China at least seems to be backing away from its zero covid policy as social unrest forces change, which could improve demand.

For desiccated coconut, we have seen mill expansions or new mill plans shelved as demand fell

We have also seen smaller, more niche mills close entirely, with other mills continuing to either work limited shifts or extend shutdown periods to slow supply; there are still some labour shortages which could hamper growth longer term.

Large inventories will start to move in Q1, and there is an expectation that Q2 could see demand pick up across the board as interest rates peak and inflation starts to fall.

For edible oils. Palm oil could receive support from China reopening and Indonesia blending B35 Biodiesel. But the global recession will continue to dampen demand more than either of these two factors. The Ukraine conflict remains a highly unknown factor for crude and edible oil that defies any analysis.

All in all, seems that oil prices look set to continue to decline into Q1 and potentially Q2.

For now, we wish everyone happy holidays and hope 2023 is a much better year for everyone. 


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