Shielding the coconut industry from uncertainties

We received an email from a reader, James Nordvik, requesting for a “good investigative view” of the current depressed copra market prices, so much so that “coconut farmers are suffering.”

Currently, a world glut in vegetable oil is happening, mainly because of recent increases in the production of palm oil driven by a high demand from almost every conceivable consumer product that needs some form of edible oil.

The fruits of palm trees are known to yield high percentages of oil but at lower production costs. This has encouraged many countries to allot more land to palm tree plantations as a way of providing better paying jobs for their small farmers, although many big companies are now also investing heavily in them.

The rapid expansion of palm tree plantations globally has contributed to an overproduction of vegetable oil, which has been much more than what is consumed by the world. Consequently, even the price of palm oil suffered sharp decreases in the last quarters — and certainly in step with that of coconut oil.

While the world vegetable oil supply glut is expected to be more manageable in the coming years, the preference for palm oil over coconut oil and many other edible oil will prevail, hence a projected slowing down in demand for copra even if prices are expected to sharply recover during the next quarters.

Fickle world prices

What we can construe from this situation is the susceptibility of coconut oil to the fickleness of world vegetable oil movements, now largely dictated by the unregulated production of palm oil that does not always match the world demand for it.

Secondly, and more importantly for the Philippines, global coconut oil demand is waning, putting at greater risk the livelihood of millions of coconut farmers already affected by decreasing yields per tree, pestilence, and more frequent natural calamities.

Being the largest exporter of copra in the world market, the Philippines is most vulnerable to the emergence of palm oil as a more versatile vegetable oil with better properties and functions. It does not help that there is no concerted effort and commitment by the Philippine government to save the coconut industry.

Much as we would want to decouple coconut oil from the movement of prices of edible oils in the world market, this is not likely to happen anytime soon. The price volatility of vegetable oil — as well as crude oil — is also the reason why it is not an easy substitute to diesel fuel.

Countries affected by the recent drop in vegetable oil have been looking at increasing the share of their affected edible oil production as a partial substitute to diesel fuel. Previous experience, however, tells us that this is more a kneejerk reaction.

When world vegetable oil prices rebound, and this is foreseen soon, all talk about increasing the share of this “green” oil as a fuel for engines will stop. This is why, despite the existence of the Biofuels Act passed in 2006 that mandates up to a five percent coconut oil blend with 95 percent regular diesel, compliance has remained at the minimum two percent ratio.

Despite scientific studies that point to coco diesel as a superior biodiesel that can contribute to a cleaner air and the economic arguments about saving the coconut industry, coconut oil as a fuel is not considered as the end-all solution to shielding the industry from world prices.

Hybridization

On the other hand, the proposal to expand the value of other coconut by-products in the export market deserves more attention. But before this can be pursued with more enthusiasm, increasing the yield of coconut trees and mitigating their susceptibility to diseases must be improved.

This is where hybrid coconut trees come in. For decades, coconut farmers have seen dwindling harvests of their coconut trees, where even a good year when farm gate prices are high will net them barely enough money to support their family during a whole year.

During lean years, like recently when the glut in world vegetable oil slashed prices by 100 percent, our coconut farmers definitely lost their shirts and were plunged deeper into poverty.

Replacing old coconut trees with hybrid varieties is seen to increase yields by at least 10 times, which could help at least double the earning potential of coconut farmers even when global prices are at their lows.

Roadmap

The long overdue release of the controversial coco levy funds would come in handy at this time towards giving farmers the financial resources to buy the hybrid varieties and planting them to gradually replace existing trees. This could form part of another long overdue document, that of a coconut industry roadmap.

The roadmap must definitely include the diversification of the coconut industry in developing new products, preferably those with export potential. Coconut water, for example, can be more than just a fad. Filipinos know for a fact the health and curative value of this drink, but it had to take an American to package and promote it into a globally popular drink.

Coconut milk, both in liquid and powder form, is also gaining popularity as a healthier substitute to dairy products. Its potential as an export product can also be studied so that it becomes competitive with milk and other substitutable food items.

Finally, there’s good old hemp and coir that should be attractive in producing durable packaging materials to replace plastics that many countries are discouraging use of. Let’s grab these new opportunity doors that are opening.

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