Market participants told Expana they are increasingly concerned about multiple recent typhoons in the Philippines that have hit key producing islands including Southern Leyte, Cebu, Negros, Panay, and Eastern Samar, causing fallen trees, flooding, landslides, and widespread infrastructure damage. Sources said the evacuations and displacement of people, combined with physical damage from the storms, has significantly reduced coconut collection activities and shortened crushing windows across affected regions. Industry insiders emphasized that while comprehensive damage assessments remain pending, regional production is likely to be severely limited for a considerable period, potentially creating substantial supply constraints for coconut oil markets.

Problematic Timing

Players told Expana that the timing of the typhoon damage is particularly problematic, as it coincides with the period when EU buyers typically return to the market to secure volumes for the coming months. Sources noted that the coconut sector had already entered this season with production lagging approximately 20% following the 2024 El Niño weather pattern and earlier storm damage, meaning each new typhoon compounds existing supply shortfalls and raises the likelihood of significant export delays. Market participants said this creates a compounding effect where weather disasters are building on previous disruptions rather than representing isolated events.

Domestic Policy Pressures

The supply constraints are being amplified by domestic policy pressures, with sources telling Expana that the Philippines’ mandatory biodiesel admixture increased from 2% to 3% in October 2024, effectively reducing the country’s available coconut oil export supplies for the 2024/25 season. Industry insiders noted that while the government has delayed planned increases to a 5% blend over concerns about supply stability and price impacts, some market participants suggested that energy security concerns may eventually force higher domestic consumption regardless of export market implications. Traders said this policy dynamic creates additional uncertainty about how much coconut oil will actually be available for international markets even once production capacity is restored.

International Pricing Not Yet Affected

However, market players told Expana that international pricing has yet to reflect the severity of supply disruptions, with CIF Rotterdam coconut oil values moving lower month on month while domestic Philippines prices strengthen significantly. Sources described this disconnect as unusual, with industry insiders suggesting that the impact on European markets may be delayed but will intensify as available supplies dwindle and buyers are forced to compete for limited prompt cargoes. Market participants noted that European seasonal demand is beginning to return just as Philippines export availability faces its most severe constraints in recent memory, players said.

Bullish Sentiment Remains

Traders told Expana that market sentiment remains cautiously bullish due to ongoing Philippines supply disruptions, but buyers are exhibiting tactical behavior rather than aggressive positioning. Sources said there has been an increase in hedging and cover activity on price dips among industrial consumers and refiners, signaling what industry insiders described as tactical risk management rather than strong directional conviction. Players noted that European buyers may be forced to accelerate cover purchases to secure prompt cargoes as supply reality becomes clearer, potentially supporting premiums even amid current international price softness.

Information Gap Causing Uncertainty

Industry insiders emphasized to Expana that uncertainty remains elevated because district-level damage assessments and port throughput data are still pending, leaving market participants unable to quantify the full extent of supply disruptions. Sources said this information gap is keeping market positioning flexible, with conservative sizing strategies dominating as players attempt to mitigate risk until clearer export and crop data becomes available. Market participants suggested that the current calm in international markets may prove temporary once comprehensive damage assessments reveal the true scale of production losses and their implications for export availability in the coming months.

Players told Expana that the combination of weather-related supply constraints, domestic policy pressures, and delayed market recognition creates a potentially volatile situation which players say could swing wildly. Sources said thin liquidity and spot market volatility are likely to persist as market participants navigate incomplete information while managing exposure.

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