Part One
A quick Google search will show that coconut oil (CNO) has more than a hundred uses—from cooking oil and moisturizer to medicines. And for the Philippines, the world’s top exporter of the commodity, CNO is a billion-dollar industry.
Data compiled by the World Trade Organization (WTO), however, show that the country’s coconut-oil exports has been slowly losing its share in the global vegetable-oil market since 2007.
In 2016 coconut-oil exports shrank to a mere 1.1 percent of the total vegetable oil exported in the world market, way below the Philippines’s 2.5-percent share in 2007, according to WTO data.
Roehlano M. Briones, senior research fellow at state-run Philippine Institute for Development Studies, said other vegetable oils, especially soybean oil, outpaced the growth rate posted by CNO, effectively getting a bigger chunk of the world market.
“That’s because the other oils have experienced growth rate, while our coconut- oil exports just recovered last year. Other vegetable oils, particularly soybean oil, are growing at a faster rate. Even though our coconut oil exports posted a good growth, its market share will effectively decrease,” Briones told the BusinessMirror.
But this downward trend has come to a stop last year, when CNO exports raked in more than $1.5 billion in revenues for the first time in recent memory.
“The world as a whole is going big for vegetable oils, and on the demand side, coconut oil benefitted from such. The good thing is, unlike the previous years when local production cannot respond, reasonably since last year, domestic production has been keeping up with the demand,” he said. “We’ve been lamenting for so long that our production has become weaker. Now, it is recovering.”
Recovery
United Coconut Association of the Philippines (Ucap) Executive Director Yvonne T.V. Agustin told the BusinessMirror that CNO exports last year recovered on the back of higher domestic coconut production. In 2017 Ucap projected that total local production would reach 2.24 million metric tons in copra terms, but preliminary data showed that full-year output reached nearly 2.4 MMT.
The volume was 16.91 percent higher than the 2.052 MMT produced in 2015, and the highest since 2014’s 2.192 MMT recorded output.
“Because of the prolonged El Nino event, we were expecting that there would be a slow recovery [in terms of production], and it showed since January [last year] that the industry’s recovery was really slow. But during the last quarter, there was a sudden push [in production],” she said. “The faster recovery in the last quarter was not expected, thus resulting in higher production and, effectively, higher exports.”
The country’s CNO exports in 2017 rose to a four-year high of 922,000 MT in oil terms, exceeding the industry’s target of 850,000 MT, preliminary data from Ucap showed. The figure was 27 percent higher than the 726,000 MT volume of CNO exported in 2016.
Furthermore, Agustin said the higher price of CNO last year allowed the industry to rake in $1.504 billion in revenue, a 30.56-percent jump, from the $1.152-billion CNO-export receipt recorded in 2016. Available PSA data showed that this is the first time that revenue from CNO exports breached the $1.5-billion level since 2010.
Sustained recovery
Ucap projects that the industry will sustain its recovery period this year, with domestic coconut production growing by 8.67 percent year-on-year to 2.607 MMT on the back of favorable weather conditions.
“[Agencies] are saying that there is a mild La Niña this year, which is positive for the industry, as coconut production needs good weather and sufficient rainfall,” Agustin explained. With the expected hike in local coconut production, Agustin said they are targeting to export at least a million tons of CNO this year, a feat that was last recorded in 2013, when CNO exports reached 1.123 MMT.
“This is one of the highest [CNO export volume in recent years],” she said. “After
three to five years, we will be reaching 1 million MT again because our exports have been below 1 million MT for the longest time.”
Declining prices
Agustin said the coconut industry does not have problems anymore with domestic production, as they expect it to steadily increase in the following years.
However, the Ucap official expressed apprehension that coconut farmers could be discouraged from selling copra because of the declining local mill-gate prices due to falling global prices.
“We based our local prices in the world market. For example, the price tonight of CNO in the world market would be converted in copra equivalent to determine the [mill-gate price],” Agustin explained.
“We have a break-even price. But if the price of CNO in the world market is low, then prices locally would also be low. And if the prices locally are low, then the farmers may be discouraged to produce copra and would instead sell husk nuts.”
Agustin said the price of CNO has been declining since the last quarter of last year due to higher supply of vegetable oils in the global market. “When November came, the year-on-year price of CNO declined. But it is not just CNO, the price of other oils also declined, such as palm oil.” “You will not see the price declining steeply, it is swaying.
But if you look at the line, the trend is really declining,” she added.
To be continued
