Department of Business and Management

College of Management and Economics

Visayas State University
Baybay City, Leyte

COCONUT

Submitted in Partial Fulfillment of the Requirements for

MGMT 20: Introduction to Agribusiness Management

Date of Submission: November 8, 2019

Submitted by:
LAMBERTE, RUEL C.
RUALES, VICTORINO JR. H.
SALILI, RONALD H.
SINTOS, MYRLA MAE B.
TAGHAP, VIRGIL MAE P.

Submitted to:
HADASHA N. BONGAT
Instructor

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I. INTRODUCTION
A. Importance of the Study

Coconut, also known as the “tree of life”, is one of the most important
crops in the Philippines. It is considered a major export, contributing 3.6% of the
country’s gross value-added (GVA) in agriculture, next to banana, corn and rice.
Indeed, the country remains to be a top producer and exporter of coconut
worldwide (PSA 2019, Lapina and Andal 2017) 1.

Generally, the coconut production had been stagnant from 2000 to 2017.
There had been no significant increase in the production’s growth rate. The
production has started to slow down in 2010 and 2013 mainly due to the
infestation of the coconut scale insects and the occurrence of major typhoons,
which destroyed huge number of coconut trees. Evidently, the yield has declined
significantly since 2010.  On the other hand, the area planted had generally
increased from 2000 to 2017, which also caused the production growth in the
recent years. The area planted accounted for almost 26% of the total agricultural
land in 2015 that covers 68 provinces in the Philippines (PSA 2019, PCA 2019,
Lapina and Andal 2017) 1.

In terms of trade, the country continues to export huge amount of coconut

products, about 70% of the country’s total coconut production. Among the
coconut products exported include coconut oil (CNO), desiccated coconut (DCN),
copra meal, and oleo chemicals (Ani and Aquino 2016). In 2017, the total export
amounted to US $ 1, 519,639 (in thousands) with Netherlands and US as the top
importing countries (Trademap 2019) 1.

The coconut system in the Philippines is degrading and slowing down. So

much issues and concerns were present nowadays. To learn and understand
more the coconut system in the Philippines, this study was conducted.

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 B. Objectives

General: To present and analyze the status of the coconut system with the
end view of identifying investment and/or entry points which can guide
prospective investors and/or development managers in the implementation of
viable projects and/or programs.

Specific:

a) To present and analyze the historical and recent developments

affecting directly or indirectly the coconut system;

b) To evaluate the structure, conduct and performance of the coconut

system;

c) To pinpoint the problems, weaknesses and gaps in the commodity

system; and

d) To identify investment opportunities, development entry points and

other recommendations for the improved viability of the commodity system.

II. Scope of the Commodity System (location and focus)

This study focuses on the background information of the coconut industry.

It discussed the status of the sector, implications of the said sectors to the other
sector and how the sector can be made more viable. The data gathered from
different sectors were belonging to the available data from national and
international institutions.

III. Background of Farm Input Sector

The agribusiness input sector includes all resources involved in
producing farm commodities. Examples include seed, fertilizer, machinery, fuel,
and credit. Production efficiency can also be linked to improvements in
these agricultural inputs2. For coconut system, the farm input sector incudes (1)

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Production and Resources; (2) Nursery/Seed Gardens; (3) Farmers/Planting; and
(4) Fertilization Pest Management3.

1. Production and Resources

According to the United Nations, coconut production in the Philippines
grew at the rate of 5.3 percent per year from 1911 to 1929, and increased by 5.2
percent from 1952 to 1966.
In 2012, the Philippines exported more than 1.5-million metric tonnes of
copra, coconut oil, copra meal, desiccated coconut, coco shell charcoal, and
activated carbon and coco chemicals, a 1.49 per cent increase compared to the
volume exported in 2011. In 1989, it produced 11.8 million tonnes and at the time
was the second largest producer but has since surpassed Indonesia. In 1989,
coconut products, coconut oil, copra (dried coconut), and desiccated coconut
accounted for approximately 6.7 percent of Philippine exports.
About 25 percent of cultivated land was planted with coconut trees, and it
is estimated that between 25 percent and 33 percent of the population was at
least partly dependent on coconuts for their livelihood. Historically, the Southern
Tagalog and Bicol regions of Luzon and the Eastern Visayas were the centers of
coconut production. In the 1980s, Western Mindanao and Southern
Mindanao also became important coconut-growing regions4.

2. Nursery/Seed Gardens
There are many things which need to be done to make our coconut sector
more productive and competitive, and thereby raise incomes and improve the lot
of our coconut farmers. At the core is the low productivity of the coconut palm
itself compared with the other sources of vegetable oils, principally oil palm.

After decades of efforts our plant breeders in the Philippines Coconut

Authority (PCA) have developed at least 12 dwarf x tall coconut hybrids which
have yield potentials of 4–6 tons copra per hectare per year (compared with the
national average of 0.75 ton copra/ha/year).

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 Unfortunately for all kinds of reasons, hybrids were ignored in the national
coconut replanting program. But not anymore because last year, 2018, at the
instance of its previous administrator, Romulo de la Rosa, the PCA went all out in
rehabilitating and mobilizing its five experiment stations in Zamboanga, Cotabato,
Davao, Albay and Bohol for commercial production of coconut hybrids.

The PCA research department led by breeder Ramon Rivera responded

and by the end of 2018 the reported accomplishments were 300,000 hybrid nuts
produced and 62,000 hybrid seedlings planted. The target for 2019 is to produce
800,000 hybrid nuts. With their 22,000 dwarf mother palms in the five PCA farms,
at full production PCA by itself conservatively should be able to produce 2.2
million hybrid seedlings every year.

However, these will not be enough. We need to produce at least 10 million

hybrids seedlings a year just to replace senile coconut trees. If we produce 10
million hybrids every year, we should be able to replace with high yielding
materials our existing over 300 million palms over a thirty-year period 5.

3. Farmer/Planting

This involves the replacement of all coconut trees rendered crown-less

and fallen by the typhoon thru proactive funding and sourcing from research
center and accredited suppliers. A new planting scheme- “tatluhan” or three (3)
seedlings per hill scheme was introduced which is proven to be typhoon resilient
and higher in productivity per unit area6.

4. Fertilization Pest Management

According to PCA, there are lots of pest management existing today.

These are integrated pest management against Rhinoceros Beetle (Use
of Metarrhizium anisopliae, Oryctes baculovirous), Coconut Leaf Beetle, Coconut
Scale Insect, Mealybug, Slug Caterpillar, Asiatic palm weevil7.

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List of ongoing projects/studies/activies:

1. Cadang cadang Disease Containment and Accreditation Program 

Implementing Unit: ARC, Regions IV-A, V and VIII
Fund Source: PCA
Status: Ongoing

2. Mass production of green muscardine fungus for the control of rhinoceros

beetle 
Implementing Unit: ARC, DRC
Fund Source: PCA
Status: Ongoing 

3. Coconut Scale Insect Control and Management

Implementing Unit: DRC
Fund Source: PCA
Status: Ongoing 

4. Coconut leaf beetle (Brontispa longgisima Gestro) Control and

management
Implementing Unit: DRC, ARC
Fund Source: PCA
Status: Ongoing

5. Development of mass production systems for   Biocontrol  Agents of major

coconut pest/disease(s)
Implementing Unit: DRC
Status: Absorbs CSI control and management projects starting July 1,
2015

6. GIS-aided mapping of major pests and diseases and emerging pests and
diseases
Implementing Unit: DRC
Status: Implemented July 1, 2015

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IV. Farm Sector

A. Local Farm Production (Aggregate, Regional, Sectoral; 10-year trend+ data on

hectare)

As stated, coconut is considered a major export, contributing 3.6% of the

country’s gross value-added (GVA) in agriculture. Generally, the coconut
production had been stagnant from 2000 to 2017 (Fig. 1). There had been no
significant increase in the production’s growth rate. The production has started to
slow down in 2010 and 2013. Evidently, the yield has declined significantly since
2010. On the other hand, the area planted had generally increased from 2000 to
2017, which also caused the production growth in the recent years. The area
planted accounted for almost 26% of the total agricultural land in 2015 that
covers 68 provinces in the Philippines (Fig. 2) (PSA 2019, PCA 2019, Lapina and
Andal 2017).

Fig. 1. Volume of coconut production, 2000 to 2017 Source: PSA (2019)

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 Fig. 2. Yield and area planted of coconut, 2000 to 2017Source: PSA (2019)

B. Technological and Economic State of the Farm Sector

 Trends in its contribution to GNP

The Philippines is the world’s second largest producer of coconut

products, after Indonesia. In 2011, coconut production reached 14 million tons
and covers 3.25 million hectares. The current yield level is 4.41 tons/hectare.
Forty eight percent (1,595,120 hectares) of all coconut is planted to Mindanao
but it produces 56% (8.1 million tons) of the total production. Hectarage by region
includes in Region IX (369,130 ha), Region X (216,310 ha). Region XI (460,700
ha), Region XII (98,350 ha), CARAGA (227,480 ha), ARMM – (223,150 ha)
Davao region is the top producer in the island (2.5 M tons) followed by
Zamboanga Peninsula (1.2 M tons).

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 Coconut is ranked 3rd in the in terms of crop production and number and
production per year are shown above in metric tons.

 Technological developments

The extensive supply base feeds a group of large and medium-scale

manufacturing sector comprising a 65 coconut oil mills with installed crushing
capacity of 4.54 million MT per year, 45 oil refineries with installed capacity of
1.53 million MT of oil per year (either cochin and refined, bleached, and
deodorized), 10 desiccated coconut plants with installed capacity 132,700 MT
per year; and, 8 oleo-chemical plants that produce intermediate coco-based
chemical products like fatty alcohol.

However, the manufacturing sector is currently in a state of overcapacity

because of stagnation in the farm sector. Most are operating below capacity for
lack of raw material supply. Many coconut farms are in need of rehabilitation.
The fruit-bearing trees are senile and need replanting. Coconut areas in the path
of devastating typhoons (like Yolanda in 2013 and Pablo in 2012) have
practically lost the standing trees. More recently, some provinces like Laguna
have suffered setbacks due to massive infestation. More significantly, despite
the industry’s contribution to the economy and its huge economic potential,
coconut-producing provinces and coconut farmers are among the poorest of the
poor in the country. This poverty can only be explained by the inability of

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producers to reinvigorate the production base to keep pace with the demand of
the manufacturing sector and exports.

The Technological Environment of a business greatly affects its ability to

produce its products and, therefore, affect its overall performance in the industry.
In the Philippines in 1997, coconut production in copra equivalent accounted for
3.83% of the total production of agricultural crops (Aragon, 2000). The coconut
production during 1990-1997 was a little small which was due to the slow growth
rates in coconut hectarage (0.9%/year) and coconut-bearing trees (0.3%/year)
(Aragon, 2000). During the period of 1990-1997, about 91% of the coconut
production in the Philippines passes through the copra stage (Aragon, 2000).
The minimal production of coconuts of the stagnant farm sector caused the over-
capacity of the coconut industrial sector. According to the study done by the
Philippine Coconut Industry, there are about 65 coconut oil mills with an installed
copra crushing capacity of 4.54 million tons a year (Dy, 2006). According to
another study made by them, the number of mills in the Philippines rose from 28
in 1968 to 62 in 1979 (“Phillipine Coconut Industry”, 1991). There was also an
issue of declining yields because of the aging of coconut trees in some regions
(“Philippine Coconut Industry”, 1991).

Having technological advancements helps the industry to improve. The

modern technologies help the companies to produce more copra which in turn
helps them produce more coconut oil.

 Key locations, factors, and farm location

The key location is the whole Philippine islands since almost all the parts
of the country are cultivating and are producing coconut. The number of coconut
farms is estimated to be around 1.4 million. The number of fruit bearing trees is
estimated at 3.44 million. Out of 79 provinces in the Philippines, 68 are coconut-
producing areas. The biggest producers are Quezon (326,025 has.), Zamboanga
del Norte (172,900 has.), Davao Oriental (155,905 has.), Leyte (167,973 has.),

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Camarines Sur (119,045 has.), Zamboanga del Sur (127,280 has.), and Misamis
Oriental (103,258 has.). Big islands like Samar, Leyte, and Masbate are
predominantly coconut-based in agriculture production. The top coconut-
producer this quarter was Davao Region, with a contribution of 453.67
thousand metric tons or 13.7 percent. This was followed by Zamboanga
Peninsula and Northern Mindanao with 12.8 and12.7 percent shares,
respectively. Coconut production was estimated at 3.31 million metric tons this
quarter, slightly lower by 0.8 percent than the 2018 same quarter level of 3.34
million metric tons. The production has started to slow down in 2010 and 2013
mainly due to the infestation of the coconut scale insects and the occurrence of
major typhoons, which destroyed huge number of coconut trees. Evidently, the
yield has declined significantly since 2001.

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 Flow chart: How much go to processing, end users, etc.

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13
V. The Processing Industry

a) Product Forms and Supply

Virgin Coconut Oil (VCO) is coconut oil extracted from fresh coconut
meat or from fresh coconut milk and is considered to be the purest form of
coconut oil. VCO has been praised for its health benefits. Some of its health
benefits include lowered cholesterol levels and reduced risk of heart disease and
diabetes. It also helps in weight loss, in healing wounds, and in boosting the
immune system with its lauric acid content.

Desiccated Coconut (DCN) or shredded coconut meat is mainly used in

pastries to add texture and flavor. The current price of DCN is at 6,124.00 (P/Kg)
as of June 20, 2014.

Copra Meal or copra cake is dried meat from “niyog” where CNO is
extracted from. It is also used as animal feed. The current price of copra meal is
at 10.65 (P/Kg) as of June 20, 2014.

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 The coconut is the country’s top export commodity making it its top dollar
earner among other agricultural exports. Earnings from the coconut industry
ranked higher compared to other agricultural commodities averaging US $ 1.58
billion from 2009 to 2011. Coconut oil (CNO) tops the list of exports with around
1.3 million metric tons produced in 2010. Desiccated coconut and copra meal are
the two other highest ranked export commodities.

b) Firms and Supply

Major producers of virgin coconut, desiccated coconut and copra meal are
as follows:

 Peter Paul Philippines

 SC Global Coco Products Inc.

 ICS Translink Philippines Inc.

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  Primex Coco Products Inc.

 New Davao Oil Mill Inc.

 Wilmar Edible Oils Philip

 Agri Exim Global Philippines Inc.

 Davao Bay Coconut Oil Mills Inc.

The mentioned firms are responsible for the production and importation
of virgin coconut, desiccated coconut and copra meal with a total of 72.53 metric
tonnes of VCO, 140.70 metric tonnes of desiccated coconut and 107,535.95
metric tonnes of Copra.

c) Competitions

Palm oil is the major competitor of coconut oil. Still, Philippines hold the
second place in terms of production of coconut oil as well as exportation. In
terms of desiccated coconut and copra meal there has been no major
competition in world market and the increasing demand of the three coconut
products is expected this year.

d) Technological and Economic State of Processing

Processing of Virgin Coconut Oil is done in country's large processing

plants. Same is through with the copra and desiccated coconut. Both are
processed in bulk amount in order to maximize the utilization of machines and to
save time and investments.

e) Foreign Trade (Imports-form, qty.,value, etc., Export)

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 The export of coconut oil, the country’s top agricultural export, is
expected to decrease this year due to an oversupply of global palm oil coupled
with the decline in local copra production. In the latest report of the United States
Department of Agriculture-Foreign Agricultural Service (USDA-FAS), it stated
that coconut oil exports may decline to 950,000 metric tons (MT) as output is
seen decreasing three percent to 1.66 million MT from the 1.71 million MT
recorded in 2018. Copra production will continue to decline to 2.5 million MT from
the 2.63 million MT last year.

In the world export market, the Philippines had a bigger share in the
export earnings from coconut products. In 2016, the contribution of the
Philippines’ export value of desiccated coconut to the world export earnings

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increased to 31.07 percent. Meanwhile, the shares of coconut oil, copra cake or
meal, and copra were declining to 39.13 percent, 45.46 percent and 0.06
percent, respectively, in 2016. Furthermore, exports of copra meal, a by-product
of the coconut oil extraction process, will remain flat at 350,000 MT this year with
Korea and Vietnam still the top export destinations.

Coconut oil is the top export product from coconut, which comprises
almost 80% of the total coconut exports and, hence, generates the highest export
earnings (PSA 2019). This oil, which is extracted from mature nuts through wet
or dry (from dried nuts) process, can be processed into cooking oil, food
ingredients, medicines, soaps, and detergents, among others. It is also known to
have multiple health benefits (PEF 2016).

Production 2007-2018

Global coconut oil production stood at 3.2M tonnes in 2018, remaining

constant against the previous year. Overall, coconut oil production continues to
indicate a relatively flat trend pattern. The growth pace was the most rapid in
2017 with an increase of 6.2% y-o-y. Global coconut oil production peaked at
3.3M tonnes in 2012; however, from 2013 to 2018, production stood at a
somewhat lower figure.

In value terms, coconut oil production stood at $5.2B in 2018 estimated in

export prices. Over the period under review, coconut oil production continues to
indicate a measured deduction. The most prominent rate of growth was recorded
in 2014 when production volume increased by 31% y-o-y. Global coconut oil
production peaked at $6.1B in 2011; however, from 2012 to 2018, production
failed to regain its momentum.

Production by Country

The countries with the highest volumes of coconut oil production in 2018
were the Philippines (1.2M tonnes), Indonesia (885K tonnes) and India (390K

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tonnes), with a combined 76% share of global production. Viet Nam, Mexico,
Malaysia and Cote d’Ivoire lagged somewhat behind, together accounting for a
further 12%. From 2011 to 2018, the most notable rate of growth in terms of
coconut oil production, amongst the main producing countries, was attained by
Cote d’Ivoire, while the other global leaders experienced more modest paces of
growth.

Exports 2007-2018

In 2018, an approximate of 1.9M tonnes of coconut (copra) oil were

exported worldwide; shrinking by -3.8% against the previous year. Overall,
coconut oil exports continue to indicate a slight curtailment. The pace of growth
appeared the most rapid in 2012 with an increase of 7.7% y-o-y. Over the period
under review, global coconut oil exports attained their peak figure at 2.2M tonnes
in 2013; however, from 2014 to 2018, exports stood at a somewhat lower figure.

In value terms, coconut oil exports amounted to $2.6B in 2018. Over the
period under review, coconut oil exports continue to indicate a pronounced
decrease. The pace of growth appeared the most rapid in 2014 when Exports
increased by 31% year-to-year. Global exports peaked at $3.4B in 2017, and
then declined slightly in the following year.

Exports by Country

In 2018, the Philippines (916K tonnes) was the main exporter of coconut
(copra) oil, comprising 49% of total exports. Indonesia (457K tonnes) ranks
second in terms of the total exports with a 25% share, followed by the
Netherlands (11%) and Malaysia (6.6%).

The Philippines experienced a relatively flat trend pattern of coconut

(copra) oil exports. At the same time, the Netherlands (+1.0%) displayed positive

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paces of growth. Moreover, the Netherlands emerged as the fastest-growing
exporter in the world, with a CAGR of +1.0% from 2011-2018. By contrast,
Malaysia (-2.3%) and Indonesia (-3.1%) illustrated a downward trend over the
same period. The Philippines (+3 p.p.) significantly strengthened its position in
terms of the global exports, while Indonesia saw its share reduced by -6.1% from
2011 to 2018, respectively. The shares of the other countries remained relatively
stable throughout the analyzed period.

In value terms, the Philippines ($1.2B) remains the largest coconut oil
supplier worldwide, comprising 45% of global exports. The second position in the
ranking was occupied by Indonesia ($570M), with a 22% share of global exports.
It was followed by the Netherlands, with a 12% share.

From 2011 to 2018, the average annual rate of growth in terms of value in
the Philippines totaled -2.9%. In the other countries, the average annual rates
were as follows: Indonesia (-6.9% per year) and the Netherlands (-1.2% per
year).

Export Prices by Country

The average coconut oil export price stood at $1,425 per tonne in 2018,
reducing by -18.2% against the previous year. Overall, the coconut oil export
price continues to indicate a temperate reduction. The most prominent rate of
growth was recorded in 2014 an increase of 34% against the previous year. Over
the period under review, the average export prices for coconut (copra) oil
reached their peak figure at $1,742 per tonne in 2017, and then declined slightly
in the following year.

Average prices varied somewhat amongst the major exporting countries.

In 2018, major exporting countries recorded the following prices: in the
Netherlands ($1,591 per tonne) and Malaysia ($1,319 per tonne), while
Indonesia ($1,247 per tonne) and the Philippines ($1,296 per tonne) were
amongst the lowest.

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 From 2011 to 2018, the most notable rate of growth in terms of prices was
attained by the Netherlands, while the other global leaders experienced a decline
in the export price figures.

Imports 2007-2018

In 2018, the global coconut oil imports amounted to 2.1M tonnes, surging
by 8.4% against the previous year. The total import volume increased at an
average annual rate of +2.6% over the period from 2011 to 2018; the trend
pattern remained consistent, with somewhat noticeable fluctuations over the
period under review. The pace of growth was the most pronounced in 2012 with
an increase of 23% against the previous year. Global imports peaked at 2.4M
tonnes in 2014; however, from 2015 to 2018, imports remained at a lower figure.

In value terms, coconut oil imports amounted to $2.9B in 2018. Over the
period under review, coconut oil imports continue to indicate a relatively flat trend
pattern. The most prominent rate of growth was recorded in 2014 with an
increase of 40% against the previous year. Global imports peaked at $3.6B in
2017, and then declined slightly in the following year.

Imports by Country

The U.S. (528K tonnes) and the Netherlands (378K tonnes) were the key
importers of coconut (copra) oil in 2018, amounting to approx. 25% and 18% of
total imports, respectively. Germany (198K tonnes) held a 9.3% share (based on
tonnes) of total imports, which put it in second place, followed by Malaysia (9.1%)
and China (6.7%). The following importers – South Korea (58K tonnes), Spain
(55K tonnes), Italy (54K tonnes), Belgium (48K tonnes), Japan (40K tonnes) and
Singapore (38K tonnes) – together made up 14% of total imports.

From 2011 to 2018, the most notable rate of growth in terms of imports,
amongst the main importing countries, was attained by Spain, while the other
global leaders experienced more modest paces of growth.

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 In value terms, the largest coconut oil importing markets worldwide were
the U.S. ($649M), the Netherlands ($464M) and Germany ($277M), together
accounting for 49% of global imports. Among the main importing countries,
Germany experienced the highest rates of growth with regard to imports, over the
last seven years, while the other global leaders experienced more modest paces
of growth.

Import Prices by Country

The average coconut oil import price stood at $1,342 per tonne in 2018,
going down by -25.9% against the previous year. In general, the coconut oil
import price continues to indicate a temperate decrease. The most prominent
rate of growth was recorded in 2014 when the average import price increased by
35% y-o-y. Over the period under review, the average import prices for coconut
(copra) oil reached their maximum at $1,811 per tonne in 2017, and then
declined slightly in the following year.

Prices varied noticeably by the country of destination; the country with the
highest price was Belgium ($1,543 per tonne), while Malaysia ($1,028 per tonne)
was amongst the lowest.

From 2011 to 2018, the most notable rate of growth in terms of prices was
attained by Germany, while the other global leaders experienced a decline in the
import price figures.

f) World Trade (Market Prospects, Supply Prospects)

The coconut trade is mainly in processed products and only 0.6% of world
production is sold as fresh nuts. With the exception of Indonesia, the main
producer countries are not the main exporting countries. Coconut exports have
increased gradually in recent years. They reached 360, 000 tonnes in 2008 in
comparison with 222,000 tonnes in 2000, a 62% increase. This overall increase

22
may be the result of an increase in per capita consumption, population growth
and the globalization of trade.

Asia, with its 77% contribution to world exports, is the main supplier of
coconuts. The main Asian, source countries are Vietnam, Indonesia, Sri Lanka
and Thailand, with respectively 34%, 31%, 11.4% and 11.3% of total Asian
exports. Other sources such as the Latin American countries and West Africa
supply the world market. With 12% of total exports, the Latin American countries
form the second largest supplier of coconut in the world, far behind the Asian
countries. The two main sources are Mexico and the Dominican Republic which
supply North America and, to a lesser extent, Europe. Africa exports half as
much as Latin America and ships nuts mainly to Europe. Côte d’Ivoire accounts
for practically all exports from Africa (95%). Asia, the leading region for coconut
exports, is also the main import zone. The Asian market accounts for 66% of all
imports, with most of the produce coming from the Asian countries that are
largely dominant in world production. Thus China and Japan purchase most of
their supply from their neighbors, such as Vietnam.

The intensity of trade in Asia is explained by the eating habits

(consumption of fresh produce and, above all, processed coconuts) in these
countries where most of production is for domestic consumption. Europe is the
second destination for coconuts, importing 34 000 to 35 000 tonnes per year.
Imports are fairly stable although they increased by 17% from 2000 to 2009. The
main source countries are Côte d’Ivoire (31%), Sri Lanka (26%) and the
Dominican Republic (20%), which between them account for 77% of European
imports. This is completed by other sources such as Costa Rica, the Philippines
and Thailand, which supply 5.3%, 4.7%, 4.5% and 2.6% respectively of the total
quantity shipped to Europe.

The volumes shipped to Europe by source country are steady, with the
exception of the Dominican Republic with a substantial decrease in shipments
from 2000 and 2009 that has been partially compensated by Sri Lanka. The main

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European importing countries are the Netherlands (33%), the United Kingdom
(19%), Italy (16%), France (9%) and Spain (8%), making a total of 85% of
imports. The Netherlands is the main European importer, re-shipping 60% of its
total exports to EU partners. It is supplied directly from source countries (13,500
tonnes) and also indirectly from other community countries (1,800 tonnes). The
United Kingdom and Italy draw their supplies directly from source countries and
import little from other EU countries. Spanish imports are mainly from source
countries, and an average of 50% of the total is exported to other European
countries. France imports as much from source countries as from other
European countries such as the Netherlands.

In value terms, India ($1B), the U.S. ($638M) and Indonesia ($545M)
constituted the countries with the highest levels of market value in 2018, together
accounting for 37% of the global market. These countries were followed by
Mexico, the Philippines, Germany, the Netherlands, Viet Nam, Malaysia, China
and South Korea, which together accounted for a further 33%.

In 2018, the highest levels of coconut oil per capita consumption was
registered in the Netherlands (10,511 kg per 1000 persons), followed by
Malaysia (4,269 kg per 1000 persons), the Philippines (2,639 kg per 1000
persons) and Germany (2,237 kg per 1000 persons), while the world average per
capita consumption of coconut oil was estimated at 457 kg per 1000 persons.

From 2011 to 2018, the average annual rate of growth in terms of the
coconut oil per capita consumption in the Netherlands totaled +2.6%. In the other
countries, the average annual rates were as follows: Malaysia (+8.6% per year)
and the Philippines (-6.2% per year).

VI. Distribution and marketing sector

A. Demand for Product Forms

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 VIRGIN COCONUT OIL

The Philippines is the leading exporter of virgin coconut oil in the world. It
started exporting VCO in 2001 with a volume of 1.8MT. In 2001 USA and
Canada were the major foreign market of Philippines Virgin coconut oil. Today, it
has reached 41 destinations such as the countries in Europe, Asia and Pacific,
Middle East, Australia and South Africa.

The global virgin coconut oil market captured significant revenue in 2016
and is expected to expand at a CAGR of around 11% over the forecast period.
Virgin coconut oil is predicted to experience high demand from consumers with
higher health consciousness and as well as aging population. By distribution
channel, the online segment is anticipated to achieve higher market value over
the forecast period due to rising internet penetration and availability of large
variety of products at a discounted price.

Below is the trend data of yearly demand of virgin coconut oil globally from
2005-2015.

COPRA

The market demand for copra consists of the demand by copra crushers
in importing countries and the demand by domestic processors. A metric ton of
copra yields 1,411 pounds or 64 per cent of coconut oil and 772 pounds or 35
per cent of copra cake/meal, a recovery rate which has remained fairly constant
25
over the years. As might be expected the technology in copra processing would
affect the value of crushed copra. More importantly, this value depends upon the
oil and meal prices which are determined by interplay of forces affecting the
demand and supply of these products.

Demand for dried coconut is increasing because of its recently discovered

health benefits like it help in improving immune system, reduces anemia and risk
of cancer and also improves heart health.

World Scenario

Copra output in the world has remained more or stable at about 5.5 million
tons during the past decade. Similarly, producing as well as consumption pattern
among major producing countries also remained largely the same.

Philippines remained the largest producer as well as the consumer of

copra in the world account for about 45% of global production and consumption.
Indonesia and India have been in the second and third positions accounting for
about 27% and 12% respectively, both in terms of production and consumption.

26
Table 1: Global demand and supply of copra (1000 tons)

  Production Imports Exports Consumption Stocks

2009-10 5706 98 112 5689 351

2010-11 5879 136 103 5976 287

2011-12 5567 82 113 5517 306

2012-13 5792 120 106 5883 229

2013-14 5816 120 83 5864 218

Source: USDA

The unique pattern observed in copra is that the major producers are the
major consumers and hence there is only a marginal quantities of trade
witnessed across countries. World trade in copra has been very minimal at about
0.1 million tons a year. Major exporters are Indonesia, Papau New Guinea,
Soloman Islands and India in the respective order, while Philippines and
Malaysia are the only two importing countries as per the statistics available with
the USDA.

 
Domestic Scenario

Domestic production of coconuts is increasing persistently particularly

from the late 2000s from about 12 million nuts in 2006-07 to 22 million nuts in
2011-12. Nevertheless, the area under coconut remained largely the same at
around 2 million hectares for more than a decade as per the data published by
the Coconut Development Board (CDB).

27
Table 2: Domestic Balance sheet of copra (1000 tons)

  Production Imports Exports Consumption

2009-10 690 0 15 675

2010-11 680 0 18 662

2011-12 680 0 19 661

2012-13 670 0 17 653

2013-14 670 0 18 652

Source: USDA

DESICCATED COCONUT

Desiccated coconut was among the Philippines’ top agricultural exports in

2018 at 145,100 tons worth $338.4 million. Top destinations were the US, the
Netherlands, Australia, UK, and Canada. Exports are expected to grow 8.6% per
year between 2019 and 2023.

There has been an increase in the sales and demand for organic
desiccated coconut and fair trade products which has a direct impact in driving
the market growth of desiccated coconut. Desiccated coconut is a key ingredient
in traditional bakery of many European countries. Apart from it, most recently

28
there has been as increase in interest of consumers in desiccated coconut based
products like breakfast cereals.

B. Product flow (thru channels &sectors; volume, margins etc.)

VIRGIN COCONUT OIL

Marketing Channels for Virgin Coconut Oil (VCO)

COPRA

Marketing channels for Copra

29
The different marketing channels identified in the marketing of copra are given
below.

Channel I: Producer→ miller

Channel II: Producer →wholesaler →miller

Channel III: Producer →village trader →wholesaler → miller

Channel IV: Producer→ co-operative society →miller

DESICCATED COCONUT

3 major marketing channels were identified in the study region until the
produce reached the consumers.

Channel-I: Agents→ Dealers→ Retailers→ Consumers

Channel-II: Producer→ Commission agent→ Retailer→ Consumers

Channel-III: Agents→ Retailer→ Consumers

30
 C. Prices and Price trends

VIRGIN COCONUT OIL

Prices of VCO ranged from US$ 3,500 to US$ 4,600/Ton FOB Manila,
Philippines. Below is the Yearly price record of Virgin Coconut Oil – Philippine
peso per metric ton.

COPRA

Despite government measures to alleviate the coconut industry from

declining prices of copra, official data showed that the farm-gate price of the
commodity continued to fall by more than half from year-ago levels.

Based on the price monitoring report conducted by the Philippine Coconut

Authority (PCA), the average farm-gate price of copra has gone down by 59.66
percent to P15.52 a kilo from P38.70 a year ago.

It remains to be seen when prices will begin to pick up. The country’s
coconut industry heavily relies on the sale of copra. To stabilize farmers’ profit,
the government is now beginning to diversify coconut products and exploring
new markets to help around three million coconut producers. The Department of
Agriculture is also looking to slap import duties on palm oil imports to protect

31
local producers. More than the declining copra prices, other problems being
faced by the industry include infestation and slow replanting programs.

DESICCATED COCONUT

Below is the price record of Desiccated coconut from 2010-2013.

D. Firms/Traders

VIRGIN COCONUT OIL

Virgin Coconut Oil producers and traders association of the Philippines

- AHYA COCO ORGANIC FOOD MFG. CORP.

- AMAZING FOODS CORP.
- AGRIFUELS CORPORATIONCOCOASENSO CORP.
- COCOPLUS AQUARIAN DEVELOPMENT CORP.
- COCOVEDA NATURAL PRODUCTS, INC.
- CT  COCO WONDERS, INC.
- DIGNITY PRODUCTS & SERVICES, INC
- MANILA HERBAL & ESSENTIAL OILS CO., INC.

32
COPRA

Philippine Coconut oil supplier

- A & G COCONUT ENTERPRISES

- ASIA PACIFIC OIL MANUFACTURING CORPORATION
- A.Y. TANTUCO MANUFACTURING, INC
- BICOL OIL MILLS AND REFINERY CORPORATION
- C-4 MANUFACTURING
- CARGILL PHILIPPINES, INC
- CELEBES COCONUT CORPORATION
- CELEBES OIL MILL, INC.
- COMI INCORPORATED
- CO SAY AND COMPANY, INC
- GRANEXPORT MANUFACTURING CORPORATION

DESICCATED COCONUT

Desiccated coconut processor/Exporter

- Tropicana Food Products, Inc. (Cocofood Processor & Exporter)

- Prime Coco Shell. Inc. (Trader)
- A Primex Coco Products, Inc. (Coco Food Processor)
- Superstar Coconut Products Co., Inc (Desiccator-Exporter)
- Pacific Royal Basic Foods, Inc. (Desiccator-Exporter)
- AHYA Coco Organic Food Manufacturing Corp. (Exporter)
- Celebes Coconut Corporation (Desiccator-Exporter)

E. Key Locations and Factors

The following are the major distributor and the key players in coconut
industry.

33
VIRGIN COCONUT OIL

 AGRIFUEL Corporation
- Products: Virgin coconut oil
- Office address: 1554 Unit 6G Globe Telecom Plaza 1, Pioneer
corner Madison St., Mandaluyong City
- Plant Address: Borongan, Eastern Samar
 ATSON COCO INC.
- Products: Virgin coconut oil
- Office Address: 84, Maharlika Highway, Barrio San Francisco,
San PabloCity, Laguna

COPRA

 Shour Jai Enterprises

- Shouri Jai Enterprises is a trading company in the Philippines
for 7 years dealing agricultural products like Copra meal, Soya
meal, fishmeal etc.
 Arcadius Trading company
- Arcaduis trading company was established in 1996 in
Philippines. They are promoting Philippine products such as
Coconut products like Copra (dried coconut). It is located at
Sandridge Rd Dorchester South Carolina Philippines.

DESICCATED COCONUT

- Franklin Baker Company

- Manufacturer and exporter of desiccated and processed
coconut products in the U.S. and abroad. The company
manufactures the retail coconut brand Baker’s Coconut. The
Business coconut products are manufactured in San Pablo City
and Davao del Sur, in the Philippines.
- AXELUM Resources Corporation

34
 - Manufacture desiccated coconut, coconut milk powder, coconut
cream, coconut water, creamed coconut, coconut oil and virgin
coconut oil, devoting a large portion of its production for export
to the world’s major continents. The coconut products are
manufactured in EDSA Magallanes Village, Makati City, in the
Philippines.

VII. Financial System Interface

LANDBANK

INTEREST RATES

Peso deposit rates

Rate For: 11/05/2019 to 11/18/2019

Savings Deposit

Amount (P) Interest rate Term

1,000.00 PhP 0.1000 p.a.

Time Deposit

Amount (P) Interest Rate Interest Rate Interest Rate

Interest Rate
(30-60 days) (91-180 (181-364
(61-90 days)
days) days)
1,000.00 -
0.2500 0.3750 0.3750 0.5000
49,999.99
50,000.00 -
0.3750 0.5000 0.5000 0.6250
299,999.99
300,000.00 -
0.5000 0.6250 0.6250 0.7500
499,999.99

35
 500,000.00 -
0.7500 0.8750 0.8750 1.0000
999,999.99
1,000,000.00
1.0000 1.0000 1.1250 1.2500
and up

United Coconut Planters Bank (UCPB)

The United Coconut Planters Bank, more popularly known by its initials,
UCPB, or by its old name, Cocobank, is one of the largest banks in the
Philippines, ranking within the top twenty banks in the Philippines in terms of
assets. It is one of two universal banks not listed on the Philippine Stock
Exchange, the other being Allied Bank. The bank, owing to its name, caters
heavily to coconut farmers, but also serves a wide-ranging clientele.

Rate for: 09/01/19 to 11/31/19

Term fixing Rate per Annum
Fixed for 1 year 5.00 %
Fixed for 2-3 years 5.75%
fixed for 4-5 years 6.00%

VIII. The Public Sector

A. The government support and regulatory system: it’s program, projects, rules,
regulation, and/or policies
The DA, PCA, and the Presidential Assistant for Food Security and
Agricultural Modernization (PAFSAM), are among the government players that
promotes the coconut industry in the Philippines. The Philippine Coconut
Authority (PCA) is the designated governmental body tasked to look after the
welfare of the coconut industry. It was created through Presidential Decree No.
232 in 1973 and absorbed its predecessors like the Coconut Coordinating
Council, the Philippine Coconut Administration, and the Philippine Coconut
Research Institute. It is essentially under the Department of Agriculture (DA) but

36
was recently transferred to the Office of the President under the direct
supervision of the Presidential Assistant for Food Security and Agricultural
Modernization. The PCA functions as a government owned and controlled
corporation (GOCC) which means that it has its own charter and budget separate
from the DA.

Four main programs of PCA:

 Production Services – include projects on coconut planting and replanting,

coconut rehabilitation, and maintenance of seed farms, institutional
development, and farm diversification.
 Market Development Services – revolve around activities to promote the
coconut industry.
 Research and Development – includes projects on varietal improvement,
crop protection, and product development.
 Regulatory Services – include the implementation of the coconut cutting
act, the registration of key products and stakeholders, and upholding
quality standards.

Laws and policies that is related and supports for the development of the coconut
industry of the country:

 The Agricultural and Fisheries Modernization Act (AFMA) or R.A. 8435

aims to transform the agriculture sector into "one that is dynamic
technologically advanced and competitive, yet centered on human
development, guided by sound practices of sustainability and the
principles of social justice.” The law, however, has little impact on coconut
farms since lands for coconut production are not regarded as prime
agricultural lands since most of these lands are not irrigated. This has led
to funding constraints and support for the coconut industry remains
minimal.

37
 The Comprehensive Agrarian Reform Program (CARP) Law of 1988
aims for a more equitable distribution and ownership of land which
recognizes the rights of farmers, farm workers, and landowners to
empower and improve the quality of their lives. This law may have social
justice in mind but it has had an adverse effect on the growth of the
coconut industry. The stringent provisions of the law have distorted the
rural land markets and have driven away possible investors. Because of
this, there had been no replanting or intercropping in most commercial
estates since 1988. In the past, some resorted to cutting down coconut
trees as an alternative source of income since investment in coconut
farms wasn’t a lucrative venture. Today the DAR has yet to distribute land
under its Land Acquisition and Distribution (LAD) program. The Samar
provinces, which have the largest portion of undistributed land, are
predominantly coconut plantations (30% or 262,524 ha).
 Republic Act No. 8048 or the Coconut Preservation Act of 1995 was
passed into law as a response to the rampant cutting of coconut trees.
This regulates the cutting of coconut trees through requirements and
permits. It also stipulates that there should be a sustainable and efficient
replanting program since the industry has significant impacts on the
country’s economy. The law has been criticized for being ineffective. The
indiscriminate cutting of coconut trees continues although
recommendations on how to improve the law’s implementation have been
made. The Philippine National Police have also made successful arrests
of illegal coconut loggers in the past decade. There are a number of
provisions of this law which were updated in 2013 through R.A. 10593.
 Coconut Cutting Law. The government log ban of the 1990s led to a
dramatic increase in lumber prices. As a result, demand for coco lumber
increased. RA 8048 was passed in 1995 following lobbying of processors
and other interest group. The provides penalties for illegal cutting of
coconut trees ranging from fines of P50,000.00 to P500,000.00 and
imprisonment from one (1) to six (6) years. The law is well-maintaining but

38
 it adds another bureaucratic hurdle and is actually an infringement to the
right to private property.
 The “Coco Levy Fund”. In the 1970s, several levies were imposed
through laws to fund government programs intended to support the
coconut industry. These programs were carefully designed such that the
coconut farmers would be the primary beneficiaries on paper. The benefits
range from ownership of a bank that presently accumulates property,
credit extensions, subsidized coconut products, scholarship and death
benefits, free replanting of old coconut trees, and benefits control of the
milling sector through UNICOM.

Laws enabling the collection of coconut levies:

 Republic Act (RA 6260) of 1971, known as the Coconut Investment Act;
 Presidential Decree (PD No. 276) of 1973, established a Coconut
Consumers Stabilization Fund (CCSF)
 PD (582) of 1974, created the Coconut Industry Development Fund
(CIDF)
 PD (1841) created the Coconut Industry Stabilization Fund (CISF).

The Philippine Coconut Authority (PCA) continuously generate or

develops ideas for the enhancement of coconut production, its products and
machineries or technologies. The recent programs/projects developed by the
Philippine Coconut Authority (PCA) which aims to strengthen coconut
production/farming in the country are:

 Rehabilitation thru Fertilization (Salt Fertilization)

This program aimed at fertilizing fruit-bearing coconut trees using common

salt or sodium chloride (NaCl) to increase coconut productivity and improve coco
resistance to pests and diseases.

39
  National Coconut Planting/Replanting (Participatory Coconut
Planting Program)

Coconut planting and replanting using open pollinated varieties (OPVs) in

identified idle open areas suitable for coconut planting, and in area where senile
coconut trees are cut in accordance with the implementation of RA 8048.

 Farm Diversification (Intercropping)

This involves the growing of short season and high value crops in between
spaces of coconut trees such as corn, peanut, banana, cacao, coffee, pineapple,
among others.

 Kasaganahan Sa Niyugan ay Kaunlaran ng Bayan (KAANIB)

This project seeks to promote coconut-based farming system as a

lucrative agribusiness venture.

 Maintenance of Coconut Seedfarm/Seedgarden

Maintenance of seed gardens are continuously being operated/undertaken

in support of the long-term coconut planting/replanting program of PCA.

 Institutional Building
Involves the continuing build-up of coconut cooperatives and coconut
farmers' organizations to enable the coconut farmers to become self-reliant
producers and entrepreneurs towards the ultimate goal of self-empowerment to
uplift their standard of living.

Other specific programs in the coconut industry from past to present (some
programs are ongoing):

 Coconut Farms Development Project (CFDP) – the project was

implemented in 1991-1999. It was envisioned as a five-year time slice
program but got extended by another four years due to funding and
implementation constraints. The project has three (3) aims or goals which
were Replanting, Rehabilitation and Intercropping. Some 23,864 ha were

40
 replanted compared to the 25,000 ha target. On the other hand, the
rehabilitation component achieved 409,806 ha fertilized in 9 years
compared to 360,000 ha targeted over 5 years. In effect, in annual terms,
replanting was 47% below target while rehabilitation was 37% below
target.
 DAR-ARCs. Under DAR, the agrarian reform communities (ARCs)
program, there are 645 coconut-based ARCs with some 350,000
beneficiaries (about 700,000 ha). Coconut-based ARCs account for nearly
40% of all ARCs (1,633)
 GMA Coconut program. The GMA coconut program which took off from
Maunlad na Niyugan Tugon sa Kahirapan Program was lauched under EO
210 of February 2000. The Maunlad Program sought to improve coconut
productivity and increase the annual income of coconut farmers from
P10,000 to P100,000 per hectare through an efficient integrated coconut-
based farming system. It also seeks to increase coconut production
through conservation, replanting and rehabilitation of the palm production.
 Medium-Term Philippine Development Plan (MTPDP). The Medium-Term
Philippine Development Plan (MTPDP), 2004-2010, Agribusiness Chapter
envisions the development of two million ha of agribusiness lands in order
to create two million jobs. Of these, 1.35 million ha will be in coconut
lands, about 80% for replanting 1.08 million ha and 270,000 ha for
intercropping.

B. International Organizations involved in the Philippine coconut industry which

play a significant role in the coconut industry and key players in the setting up of
a global program are:
 Asian and Pacific Coconut Community (APCC). The APCC is an
intergovernmental organization of 18 coconut-producing states in the Asia-
Pacific region, including the Philippines, which aims to promote,
coordinate and harmonize all activities of the coconut industry. It accounts

41
 for over 90 percent of the world coconut production and exports of coconut
products.
 Bureau for the Development of Research on Tropical Perennial Oil Crops
(BUROTROP). Bureau for the Development of Research on Tropical
Perennial Oil Crops is an association supported by the E.U., the mandate
of which is to assist, strengthen and further develop research on tropical
perennial oil crops.
 Coconut Genetic Resources Network (COGENT). Coconut Genetic
Resources Network is an international IPGRI project which aims to
promote national, regional and global collaboration among coconut-
producing countries and partner institutions in the conservation and use of
coconut genetic resources.
 Food and Agriculture Organization. FAO implemented the Coconut-Based
Farming Systems Programme in response to damages caused by the
typhoon Haiyan.

Apart from those mentioned international organizations above, there are

also several donor agencies that fund coconut development projects and some
research activities (linked or not with the projects). Among them are the CFC,
World Bank, Europe, Asian Development Bank, IFAD, AFD, ODA, GTZ and
ADAB.

C. Other Institutions

Many institutions or organizations such as LGUs, private sector, civil

society and academe, supports and contributed a lot to the coconut industry. The
United Coconut Associations of the Philippines, Inc. (UCAP) is a confederation of
associations/organizations involved in the various activities of the coconut
industry. For several decades, UCAP contributed a lot to the development of the
coconut industry. UCAP was incorporated on 16 June 1964 as a non-stock, non-
profit organization. Its primary purposes are: 1) to unite all elements of the
coconut industry and work for their common good; 2) promote harmonious
coordination among the various sectors of the industry for the common benefit of

42
the producing, trading, processing and consuming public; 3) to inculcate and
preserve high standards of honor and integrity among its members and to
promote just and equitable principles and practices of trade; 4) to serve as a
center of information about the coconut and related subjects; and 5) to provide a
forum for the discussion of problems, issues affecting the coconut industry and/or
any of its sector.

United Coconut Associations of the Philippines (UCAP) is composed of

several member organizations. These organizations are the Association of
Coconut Brokers, Inc. (ACB), Association of Philippine Coconut Desiccator
(APCD), Chamber of Philippine Coconut Oil Mills (CHAPCOM), Coconut Oil
Refiners Association (CORA), Coconut Shell Charcoal & Activated Carbon
Producers and Exporters (CSCACPE), Organization of Philippine Copra
Exporters, Inc. (OPCEI), Philippine Association of Fresh Coconut Exporters, Inc.
(PAFCEI), Philippine Coconut Oil Producers Association, Inc. (PCOPA),
Philippine Coconut Producers Federation, Inc. (COCOFED), Philippine
Oleochemical Manufacturers Association (POMA), United Coconut Associations
of the Philippines, Inc. (UCAP), Virgin Coconut Oil Producers and Traders
Association of the Philippines (VCOPTA).

Coconut Industry Investment Fund Oil Mills Group (CIIF OMG), a private
institution that also contributes to the coconut industry of the country, is a
conglomerate of strategically located oil mills and refineries in the Philippines. Its
operating plants have a combined annual crushing capacity of 370,000 metric
tons of copra with a refining capacity of 240,000 metric tons of different grades of
processed coconut oils. The oil mills’ total crushing capacity accounts for about
10% of the country’s coconut oil milling industry. The institution has a Copra
Buying Stations which are setup in locations near coconut farmers and local
dealers, to gather and buy the copra. This assures the oil mill plants sufficient
stocks to keep the manufacturing operations dynamic.

Through the years, the CIIF OMG has proven to serve global demands for
coconut-based fats and oils and raw materials for animal feeds. CIIF OMG’s very

43
own local coconut cooking oil brand “Minola” consistently demonstrates
leadership in the Philippine vegetable oil business. It has been in the Philippine
market for over 50 years.

IX. Summary Analysis

A. Farm Sector
In recent years, the agricultural sector roughly contributes 12-15 percent
of the Philippine GDP (Index Mundi, 2011). The agricultural sector had
contributed roughly 4 billion USD in 2010. Coconut oil was computed to be
39.67% percent of the total GDP contributed by the agricultural sector
(Department of Agriculture, 2002). The GDP of 2010 has risen by roughly
30.67% from the previous year’s GDP (Department of Agriculture, 2011).
Though it is true that the GDP indeed decreased in 2011, mathematically
speaking the GDP contributed by the agricultural sector did not. During 2010, the
GDP of the Philippines is roughly 7.3% and roughly 13.9% of comes from the
agricultural sector (Instituto Espanyol De Comercio Exterior). In 2011, the GDP is
roughly 3.7% which is significantly lower than the previous year, but the
agricultural sector still maintains and contributes roughly 12.3% which is not bad
(Index Mundi, 2011). Furthermore, in December 2011, coconut oil exports began
to rise again by about 2.7% (Reuters, 2011). Thus, coconut oil exports would
increase by the year 2012. The Philippine Coco Coir Industry forecasts that by
2016, the exports of coconut oil would increase by 400 percent (“Coconut
industry poised as the next major employment sector”, 2011).
For the technological advancement, extensive supply base feeds a group
of large and medium-scale manufacturing sector comprising a 65 coconut mills
with installed crushing capacity of 4.54 million MT per year, 45 oil refineries with
installed capacity of 1.53 million MT of oil per year, 10 desiccated coconut plants
with installed capacity 132,700 MT per year; and, 8 oleochemical plants that
produce intermediate coco-based chemical products like fatty alcohol. However,

44
some manufacturing sector is currently in a state of overcapacity because of
stagnation in the farm sector.
In the Visayas region, specifically Borongan, Eastern Samar of region 8, it
is known to be one of the major plantations of coconut in the Philippines having
its office at the Mandaluyong City which is called Agrifuel Corporation. Agrifuel
Corporation processes its organic coconut products and there are no pesticides
or fertilizers used in growing coconuts which ensures that they are natural and
organic. Agrifuel also employ total natural processing to ensure the very best
coconut products available. Their major products include vinegar, crude coconut
oil, coco fiber, etc.
In the processing sector, it starts with the production inputs to coconut
parts to machinery, equipment for project, primary product to value-added
products to market sales income.

B. Processing Sector
Among the many products processed from the coconut, the 3 chosen coco
products in this study includes the virgin coconut oil, desiccated coconut, and
copra meal. Virgin coconut oil is coconut oil extracted from fresh coconut meat or
fresh coconut milk and is considered to be the purest form of coconut oil. VCO
has been praised for its health benefits. Desiccated Coconut (DCN) or shredded
coconut meat is mainly used in pastries to add texture and flavor. Copra Meal or
copra cake is dried meat from “niyog” where CNO is extracted from.
Major producers of virgin coconut, desiccated coconut and copra meal
includes Peter Paul Philippines, SC Global Coco Products Inc., ICS Translink
Philippines Inc., Primex Coco Products Inc., New Davao Oil Mill Inc., Wilmar
Edible Oils Philip, Agri Exim Global Philippines Inc., Davao Bay Coconut Oil Mills
Inc., etc.
Palm oil is the major competitor of coconut oil. Still, the Philippines holds
the second place in terms of production of coconut oil as well as exportation. In
terms of desiccated coconut and copra meal, there has been no major

45
competition in the world market and the increasing demand for the three coconut
products is expected this year.
Processing of Virgin Coconut Oil is done in the country's large processing
plants. The same is through with the copra and desiccated coconut. Both are
processed in bulk amounts to maximize the utilization of machines and to save
time and investments.

C. Foreign Trade Sector

About 80% of local coconut production go to the export market with the
remaining 20% to the domestic market. Coconut oil (crude and refined), copra,
copra meal and desiccated coconut are the country’s traditional coconut product
exports. There are 39 other non-traditional coconut products and by-products
that are being exported by the country. Coconut oil accounts for 85-95%of the
total coconut exports by volume and 80% by value. Major competitors are palm
oil, soybean oil, sunflower oil and rapeseed oil. In 2004, export revenues of the
country from traditional coconut product exports amounted to US$841 Million, still
below the 1995 figure of US$974 Million but still 11% higher than in 2003.
Coconut oil export was $557.79 at $442.71/mt desiccated coconut $99.71 M,
coco chemicals $48.98 M, coconut shell charcoal $6.45 M, activated
carbon$32.23 M, copra meal $31 M and other products $44.76M. Philippine
Coconut Authority figures revealed export of virgin coconut oil (VCO) in 2004
amounted $ 553,469 from 177 MT. The export in 2003 was 103 MT with a value
of $406,580. The United States was almost an exclusive destination with 170 MT
for a market share of 96%. Seven other countries took in the remaining 7 MT with
uptake ranging from nil to 2 MT.
In the world export market, the Philippines had a bigger share in the
export earnings from coconut products. In 2016, the contribution of the
Philippines’ export value of desiccated coconut to the world export earnings
increased to 31.07 percent. Meanwhile, the shares of coconut oil, copra cake or
meal, and copra were declining to 39.13 percent, 45.46 percent and 0.06
percent, respectively, in 2016. Furthermore, exports of copra meal, a by-product

46
of the coconut oil extraction process, will remain flat at 350,000 MT this year with
Korea and Vietnam still the top export destinations.

D. Distribution and Marketing Sector

World demand for coconut oil is increasing due to coconut oil’s high lauric
fatty acid content for use primarily in detergent and cosmetic industries as well as
the surge of demand for environment-friendly products. These products are used
in various applications such as soap and detergent production. Local and export
demands for virgin coconut oil is also increasing. Mindanao will be increasing
coconut area by at least 110,000 hectares by 2010 and increase yield to 1.4
mt/ha in copra terms.
The market demand for copra consists of the demand by copra crushers
in importing countries and the demand by domestic processors. A metric ton of
copra yields 1,411 pounds or 64 percent of coconut oil and 772 pounds or 35
percent of copra cake/meal, a recovery rate which has remained fairly constant
over the years. As might be expected the technology in copra processing would
affect the value of crushed copra. More importantly, this value depends upon the
oil and meal prices which are determined by interplay of forces affecting the
demand and supply of these products.
There has been an increase in the sales and demand for organic
desiccated coconut and fair trade products which has a direct impact in driving
the market growth of desiccated coconut. Desiccated coconut is a key ingredient
in traditional bakery of many European countries. Apart from it, most recently
there has been as increase in interest of consumers in desiccated coconut based
products like breakfast cereals.

In marketing practices supply chain of coconut has a multi-layered and

complex marketing channel, form the points of production to its domestic and
international markets. The bulk of copra is sold to village buyers before the copra
reaches the mills. Copra pricing is largely influenced by world prices of coconut
oil as well as domestic copra supply conditions.

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 Some firms and trades which involves in the distribution and marketing of
Virgin Coconut Oil, Desiccated Coconut, and Copra includes Agrifuels
Corporation Cocoasenso Corp., Cocoplus Aquarian Development Corp., A & G
Coconut Enterprises, Asia Pacific Oil Manufacturing Corporation, Tropicana Food
Products, Inc., Superstar Coconut Products Co., Inc, etc.

E. Financial System Interface

For the financial system interface, there are only 2 firms assisting the
coconut industry, the Landbank and the United Coconut Planters Bank (UCPB).
Landbank has its peso deposit rates and UCPB, being one of the largest bank in
the Philippines in terms of assets.

F. Public Sector Impact

Government policies are generally biased against tree crops in general,

and coconut in particular. First, public sector investments have focused on
irrigated rice due to the decades-old drive for rice self-sufficiency. Second, slow
implementation of CARP has contributed to investor uncertainties, and militated
against investment in long-gestating tree crops. Third, limited grace period for
tree crops and the high real interest rates resulting partly from Government
macro policies had made investment in long gestating crops unattractive (World
Bank, 1999). Further, the age old reliance on the “recovery” of the coco levy fund
as a means to develop the industry has also boomeranged. Little funds were
allocated by the Government to coconut replanting since 1986. Moreover, the
AFMA funding constraint is severely exacerbated in the case of coconut where
support is miniscule relative to the needs.

Meanwhile, programs implemented included the World Bank-supported

Coconut Farms Development Project (CFDP), DAR’s agrarian reform
communities (ARCs) program, and the GMA Coconut program which took off
from the Maunlad na Niyugan Tugon sa Kahirapan Program, and the
development of two million ha of agribusiness lands in order to create two million

48
jobs under the MTPDP where 1.35 million ha will be in coconut lands. The focus
has mainly been on increasing the productivity and income of farmers through
replanting, fertilization and rehabilitation, as well as implementation of coconut-
based farming systems.

Overall, however, the policies and programs of the coconut industry were
characterized by lack of sustained directions and funding. The “low intensity”
approach to solving the problems of the coconut industry meant lost opportunities
in the last two decades especially in the areas of poverty alleviation, global
competitiveness, sustainable development, rational use of resources, and people
empowerment. It is a sad commentary of what development management is not.
Coconut provinces continue to be equated with high poverty and, in many cases,
insurgency. Vast areas of lands generate low returns.

The coconut industry is not globally competitive due to failure to put in

place competitive strategies and actions. Agriculture is under threat as many
coconut regions are unable to provide good incomes. In the process,
outmigration becomes the option for the rural poor.

G. Other Factors

Investment Opportunities
 Coconut expansion area for hybrids
 Macapuno production
 Production of coco peat, geotextiles, and other products from coconut
husk
 Production of activated carbon
 The medical benefits derived from coconut oil can be further enhanced to
promote as a health food or nutraceutical
 Virgin coconut oil production

H. Problem Analysis

49
 Large scale cutting of coconut trees, planting of other crops in coconut
farms and the shift to non-agricultural use.
 Decline in coconut production due to low nut yield
 Poor copra quality due to inadequate processing methods
 Under-capacity in the oil milling/desiccated coconut sector
 Lack of processing infrastructure in the non-traditional coconut byproduct
sector such as coir fiber
 Multilayered copra trading resulting in reduced farmers income with an
average traders gap of P2.5/kg of copra, equivalent to 24% of farmgate
price or 20% of millgate price
 Inadequate market initiatives to expand traditional and promote
nontraditional exports
 Low domestic utilization of coconut products
 the lack of top level commitment which has led to a lack of a serious
development program for the industry

 Considering the impact that Typhoon Yolanda has has on the Philippines
one of the biggest impacts has been to the coconut industry. The total
destruction of over 15 million trees has in one stoke wiped out the
livelihoods of thousands of coconut farmers and up to 52% of small scale
farmers in the Philippines are older people. Bear in mind that the
restoration of full production is going to take 6-9 years so these farmers
are going to need to find alternative livelihoods and find them fast. If
alternative livelihoods and the restoration of the coconut industry doesn't
happen soon the it is possible that food insecurity in the region will
escalate to even higher levels.
1. Even if farmers could plant all the trees in the next week it would
still take up to six years before the trees start to produce and up to
eight years before they reach full production, thus leaving a
significant income gap in the lives of thousands of rural families.

50
 Clearly alternative sources of income needs to be developed
quickly.
2. Many farmers may choose an alternative livelihood which has a
short term cash cycle. For example, a 55 year old farmer might not
want to wait eight years before their income is back to pre- typhoon
condition, it simply takes too long.
3. It has been suggested that they could grow alternative crops like
rice, corn, cassava etc., which is of course possible and indeed will
be a solution for those farmers who own land that can be converted
to alternative crops. However for other farmers it's not quite that
simple, in Villaba for example the soil is rocky and might not be
suitable for the production of alternative cereal or cash crops. In
such cases consultation, land profile analysis, soil testing etc. will
be needed to develop a reasonable alternative livelihood strategy.
Farmers could switch to or increase animal production but again
this depends on the carrying capacity of the land, auxiliary
veterinarian services for these farmers.
4. We need to understand the coconut value chain and engage with
all the relevant stakeholders

X. Conclusions and Recommendations

Conclusion

The developments and success of the different programs of the PCA and
other coconut industry related agencies is the reason why coconut industry
remains the top export commodity of the country. The PCA programs that greatly
contributed to the development of coconut industry are the Rehabilitation through
Fertilization (Salt Fertilization), National Coconut Planting/Replanting, and Farm
Diversification (Intercropping). Kasaganahan sa Niyugan ay Kaunlaran ng Bayan
(KAANIB) and Maintenance of Coconut Seed Farm/Seed Garden. Among those
programs generates developments through research which includes

51
determination of effects of Virgin Coconut Oil in humans with emphasis on
cholesterol, development of high electrolyte low glycemic index ready-to-drink
coconut water, production and nutritional studies of coconut flour, analysis of
coco sugar, packaging and shelf-life studies on good quality coco sugar and coco
syrup and development of Philippine National Standards of Coconut Sugar, VCO
and Coco Flour for the basis of good quality requirements in the export of
coconut products. The success of those research is achieved by the help of
different supporting agencies such as PCA, PCA-FNRI, PCA-ADMU, PCIERD-
DOST, etc.

However, the recent report about the coconut industry in terms of

production had been stagnant from 2000 to 2017. There had been no significant
increase in the production’s growth rate. The production has started to slow in
2010 and 2013 mainly due to the infestation of the coconut scale insects and the
occurrence of major typhoons, which destroyed huge number of coconut trees.
On the other hand, the area planted had generally increased from 2000 to 2017,
which also caused the production growth in the recent years. The area planted
accounted for almost 26% of the total agricultural land in 2015 that covers 68
provinces in the Philippines. In terms of trade, the country continuous to export
huge amount of coconut products, about 70% of the country’s total coconut
production. The coconut products exported includes Coconut Oil (CNO),
Desiccated Coconut (DCN), copra meal and oleo chemicals.

Despite being a top export commodity, the coconut industry is still facing
different problems. Among the identified problems in the industry are the
unorganized supply chain, vulnerability of coconut to world price fluctuations, low
farm productivity, which roots from infestations of cocolisap, the aging pf current
crop of coconut trees and poor nutrition, inadequate infrastructure support and
poor farm to market roads, low allocation on research and development (R&D)
and presence of corruption and bureaucracy. Another main factor that
considerably affected the coconut industry recently is the controversies
surrounding the coconut levy found. Thus, industry is losing ground in the highly

52
competitive global vegetable oils market. The said problems limit or hinders the
coconut industry to attain its full potential, especially with respect to productivity.

Opportunities and possible entry points for coconut industry is to boost the
domestic demand for coconut oil through the Biofuels Act. The country could take
advantage of the Biofuels Act, which proposes to increase the coconut biodiesel
blend in automotive diesel from the current 2% to 5%. Aside from promoting
cleaner fuel and emission, the increase in the coconut content of diesel would
create new demand for the coconut oil; hence, could provide additional revenue
for the coconut farmers, However, the Biofuels Act is still subject to review and
yet to be passed as a law (Simeon 2018).

On the other hand, the coconut industry remains to offer a lot of

opportunities that could be entry points for its development. The industry may
focus its investments in producing and/or developing other coconut products
such as coconut water, coconut sugar, coconut flour, and coco coir. Diversifying
into this kind of products will generate more employment among small and
medium enterprises, and will promote inclusive growth in the coconut industry
(Javier 2018).

Recommendations

In order to attain or reach the full potential of the coconut industry, the
country should be persistent in pushing for the disbursement of the coco levy.
The release of the fund can create many developments of the industry and
opportunities for the coconut farmers.

Modernization of the Philippine coconut industry can also be a key for

development and generating of many opportunities and entry points. There are
four pathways to modernize the industry. First is raising the primary productivity
of the coconut tree itself. This can be attained by mass replanting of hybrid
variety of coconut. The PCA has bred several dwarf x tall hybrids with yields 3 to
4 times the national average coconut tree. The application of common table salt
(sodium chloride) can also increase the yield of the coconut. With fertilization and

53
better farm maintenance, the industry will be able to increase productivity by 50
percent. Second is the intensive, sustainable multiple canopy coconut farming.
There are so many high value crops that can be profitably grown between the
rows of coconut trees. PCA also pursued a program on coconut intercropping,
which proves its effectivity. Third is the maximum utilization of the coconut fruit
and vegetative parts by conversion into various products. The coconut tree is a
well-known “tree of life” because of the various uses of all its plant parts. Many
products can be obtained by fully utilizing the coconut tree such as virgin coconut
oil, bottled young coconut (buko), coconut sugar and many more. Last is the
downstream integration with oleo chemicals production. This method is more on
taking advantage of the Biofuels Act by blending coconut oils into the common
biodiesel fuels such as the blending of the coconut methyl ester (CME).

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