Two weeks ago, the chief of the Department of Agriculture (DA) raised the possibility that the Philippines has become a dumping ground for cheap palm oil. (See “Surge in palm oil import raises fears of dumping,” BusinessMirror, November 23, 2018). The figures cited by Agriculture Secretary Emmanuel F. Piñol are, indeed, quite alarming.
Piñol revealed that palm oil imports jumped 900 percent to 200 million kilograms in 2017, from just 20 million kg in 2016.
Overproduction in countries regarded as major palm oil producers pushed the price down. Palm oil can influence the movement of international prices because it accounts for more than a third of vegetable oils being traded worldwide. And, according to the Philippine Coconut Authority (PCA), the price of palm oil has gone down steadily since December 2017.
Data from the Philippine Statistics Authority (PSA) showed that the country’s imports of palm oil and its fraction (whether refined, but not chemically modified) reached 144.509 million kg in January to September.
What is clear from the data is that there is a huge quantity of palm oil shipments to the Philippines, but the magnitude is unclear. This may be the reason the DA chief has used the “D” word. Dumping, defined by the World Trade Organization as a situation where the price of a product sold in the importing country is less than the product’s cost in the exporting country, is a serious issue. However, the government must look into the possibility that palm oil, despite its low international price, is still being smuggled into the country.
In 2012 local palm growers belonging to the Philippine Palmoil Development Council Inc. complained of imports from Indonesia and Malaysia flooding the Philippine market. The nascent Philippine palm oil sector was hobbled by undervalued shipments and smuggled palm oil. That the local palm oil industry has not expanded significantly is proof that potential investors have been discouraged by the government’s failure to address these concerns.
The recent jump in palm oil imports has also become worrisome for coconut farmers. The influx of cheap shipments depressed local copra prices, threatening to rob Philippine coconut farmers of their livelihood. The dilemma confronting farmers came about because of government’s foot-dragging. Interventions should have been introduced as early as last year, when wire agencies and international news organizations started reporting about the overproduction of palm oil and the movement of prices.
Mitigating measures that the government would roll out this year are best compared to something that has lost its efficacy. Citing an analyst, Reuters reported two months ago that there will be a deficit of palm oil production in January to September 2019 because of faster consumption and slower growth in output. This means that palm oil would become more expensive starting the first quarter of next year. The projected rise in palm oil prices bodes well for the Philippines because this would cause the international price of
coconut oil to accelerate.
Fluctuations in prices are cyclical and are truly beyond the control of any government. But no government should say that it could not implement long-term measures that would avert undervaluation and smuggling.