COCONUT INDUSTRY PROFILE I.

INDUSTRY OVERVIEW Coconut production constitutes one of the four major sectors of Philippine agriculture, the others being rice, corn and sugar. About 85% of coconut production is exported in the form of copra, coconut oil and dessicated coconut. The coconut industry is a dominant sector of Philippine agriculture. The country has the worlds widest geographical area planted to coconut. Of the 12 million hectares of farmlands, 3.1M hectare is devoted to coconut and 68 out of 79 provinces are coconut areas. The Autonomous Region in Muslim Mindanao(ARMM) has a land area of 284,223 hectares planted with coconuts with over 32M coconut bearing trees and 88,956 documented coco farmers. Of the five (5) provinces of ARMM, the province of Basilan has the biggest coconut areas with 67,763 hectares, followed by Sulu with 66,902 hectares, then the province of Maguindanao with 63,122 hectares, Lanao del Sur with 55,150 hectares and Tawi-Tawi with 40,056 hectares (PCABAS). II. PRODUCT/ COMMODITY DESCRIPTION Botanically speaking, a coconut (cocos nucifera) is a fibrous one-seeded drupe, also known as a dry drupe. However, when using loose definitions, the coconut can be all three: a fruit, a nut, and a seed. The term coconut pertains to the fruit while the tree is called a coconut palm. It belongs to the Arecaceae palm family and can grow up to 6 meters tall. Called the "tree of life" in the Philippines, all parts of the palm has uses -nothing is wasted even at the end of its fruit bearing years.. As a result, coconuts can produce drink, fiber, food, fuel, utensils, musical instruments, building material and many more. The wonderful fruit of the coconut palm is rich in specific fats that have incredible health benefits. It boosts immunity, kills bacteria and viruses, protects against cancer and other degenerative diseases, prevents osteoporosis by promoting calcium absorption, slows down ageing and improves the complexion. It even helps weight loss!

In the advent of the entry of palm oil in the country, many thought that coconut industry is now a sundown industry due to anti-coconut oil campaign (health hazard) by soybean, corn and canola lobby groups in USA and European Union. But, with the emergence of non-traditional coconut products like virgin coco oil, cochin oil, geotextile and flour, the industry is now on the rise. III. INDUSTRY COVERAGE/STRUCTURE As mentioned, everything in a coconut palm tree is useful from leaves to bark. The whole of the coco fruit also has so many uses, to wit: Coconut Meat - Other than copra and dessicated coconut, the meat can be turned into virgin coconut oil, skim milk, protein isolate, coconut meal and flour, feeds or pulp, cochin oil and biodiesel. A by-product of biodiesel or cocomethyl ester is glycerin which is used as intermediate product for many other uses. Coconut Husk - From the husk, coir fiber can be produced and further turned into geotextile as well as peat, a major component for organic plant media fertilizer. Coir fibers are also inputs to a variety of other products such as brushes and brooms, ropes and yarns for nets and bags and mats, padding for mattresses, rugs, carpets and needle felts. The peat can be turned into charcoal, composite board (particle board and cementbonded panels), moulded rubberized coir, community pots for ornamentals, etc. Coconut Shell - The shell can be produced into charcoal and further turned into activated carbon. Coconut Water - The water can be processed into beverage, vinegar, distilled water, component for tissue culture work and enzyme production.

IV. INDUSTRY PERFORMANCE

The country is only second to Indonesia as the world's top producer of coconut products, but, the Philippines is the top exporter of coconut products, 59% share of the worlds coconut exports.. About 64% of the world's copra & coconut oil comes from the Philippines. Our coconut product exports is one of the top 5 dollar earners for the country, average of U.S. $760 M per year. The industry contributes about 1.14% of the Gross National Product (GNP) and annual average of 5.97% contribution to Gross Value Added (GVA). However, official data from the Philippine Coconut Authority showed that the Philippines exported in January 2009 about 58,572 MT of copra. This represents a sharp drop of 72.4% from January 2008 at 212,378 MT. Gross export receipts during the month likewise nosedived 72.6% to USD42.825 million from USD156.385 million previously, caused mainly by reduced shipment of coconut oil and low coconut oil border price. Export of coconut oil slumped at 79.8% year-on-year to 24,579 MT from 121,766 MT; average traded price tumbled 30.1% to USD745.76/MT from USD1,066.74/MT FOB. Shipment of oleochemicals plunged 66.0% to 2,198 MT as copra from 6,467 MT. Desiccated coconut was the only gainer among the major exports with delivery at 11,228 MT vastly increased by 37.4% from 8,170 MT. There was no copra meal export reported for the month as against shipment of 36,031 MT last year. Other products performed as follows, in MT: coco shell charcoal 1,325 (5.8% from 1,407), activated carbon 2,145 (-19.0% from 2,648), glycerin 493 (69.6% from 1,624). Aside from dessicated coconuts, fresh coconuts exports was on the rise with 162 (+96.2% from 83) and others with 2,891 (+35.6% from 2,133). V. PROJECTED DEMAND AND SUPPLY Supply: Of the 324 million coconut trees in the country, ARMMs participation is 32,860,912 million in which 85% are considered productive ( please see table below). Average production of trees is 43 nuts/year. Farmers usually sell this to big coconut buyers in the area in fresh form or in copra, where they can easily get cash advances. Table I. Coconut Profile of ARMM, by Province Province Basilan Coconut Area (in Has.) 67,763 Coconut Farmers (Nos.) 18,872 Coconut Trees (Nos.) 5,919,589

Lanao del Sur Maguindanao Sulu Tawi-Tawi TOTAL

46,380 63,122 66,902 40,056 284,223

16,342 18,473 22,502 12,767 88,956

7,188,855 9,473,185 6,647,820 3,631,463 32,860,912

Source: Philippine Coconut Authority, XIV-ARMM (2007)

Table II. Volume of Coconut Production, ARMM, 2005-Sept. 2007 (MT) Province Basilan Lanao del Sur Maguindanao Sulu Tawi-Tawi TOTAL 2005 160,515.36 108,222.05 335,689.34 150,008.88 155,926.00 910,361.63 2006 206,159.46 170,338.44 374,287.74 374,287.74 203,538.07 1,328,611.45 2007 50,625.87 44,591.00 117,348.00 49,950.95 33,252.24 295,768.06 TOTAL 417,300.69 323,151.49 827,325.08 574,247.57 392,716.31 2,534,741.14

Source: Bureau of Agricultural Statistics/PCA Demand: The country is top exporter of coconut products accounting about 59% share of the worlds coconut exports and second top producer of coconuts. Our biggest market for crude coconut oil are Netherlands, Spain and United States. For cochin oil, Europe, USA and Japan are our biggest importers. It is also Japan and Europe as our main importer of RBD coco oil. Apart from Europe and the US, other importers of crude coconut oil were Taiwan , Singapore, Hongkong, and Russia. In the case of RBD oil, apart from Japan which was the top destination, other buyers included United Arab Emirates, Bulgaria, Singapore, Iran, China), Russia, Azerbaijan, Israel, Bangladesh Pakistan, Australia and New Zealand . Export of desiccated coconut went to 38 countries with US as market leader, trailed by United Kingdom , and the Netherlands. Substantial volume likewise went to France , Russia, and Belgium. Other significant importers are : Australia, Ireland, Korea, Singapore, Germany, Sweden, Taiwan, Hongkong, Brazil, China. Japan was the leading destination for coconut shell products exports from the Philippines. An almost exclusive market for coco shell charcoal, is

Japan which gets the bulk of the total exports. Taiwan.

Other markets are Korea and

Top market for activated carbon is also Japan, strong second is Singapore, followed by Korea, US and Russia. Eleven other countries are also our activated carbon exporters.

IV.

INDUSTRY STRENGTHS/WEAKNESSES Strength: Second top producer of coconuts in the world Top world exporter of coconut products Emergence of non-traditional coconut products High cost of labor due to mandated minimum wage

Weaknesses: High transport cost Poor copra quality due to lack of drying facilities Limited market development and promotion Anti-coconut oil campaign by soybean, corn and canola oil lobby groups in USA and EU Rampant cutting of coconut trees

V. GOVERNMENT POLICIES AND PLANS A number of laws have been enacted since 1971 to institute various levies on the coconut industry. Notable among the various funds that have been imposed on the industry are the coconut investment fund, the coconut consumer stabilization fund, the coconut industry development fund, the coconut industry stabilization fund and the coconut reserve fund. The proceeds of these funds are now the subject of a controversy on the unconstitutionality on the private nature of the funds. Our courts have not resolved the issue and the funds are still sequestered and frozen. Moreover, it is observed that policies enforced by the government are probig coco producers only to the detriment of small farm landholdings. With this development, BOI, NEDA and other business development team recommend an Action Plan to:

1, Formulate a roadmap to guide the industry in tandem with the conduct of regional and national stakeholders summits to improve the investment climate in emerging coconut products. 2. Conduct investment forums to introduce available technologies, secure investments for SMEs and provide assistance to farmer groups in setting-up SMEs. 3. Enforce through the LGUs, PNP and PCA the law that prohibits the cutting of the coconut trees. 4. Formulate and enforce, through PCA, BFAD and FDC the product standard for all emerging coconut products. V. PROSPECT FOR THE INDUSTRY The world demand for Virgin Coco Oil (VCO) is increasing due to its high lauric acid content and newfound applications in the cosmetics and nutracurtical industries. Also gaining popularity in the world market is coir with its nontraditional applications. Its demand is pushed by the eco-friendly characteristics of the product. Coir dust is also finding sizeable market in Europe and Canada. The bulk of coco peat exports is taken by Sri Lanka, Korea and Japan. The international concern for the environment increases the use of activated carbon.