Not the coconut

For the longest time, the Philippines was the world’s biggest producer of coconuts and consequently, the largest coconut oil as well as other coconut products exporter in the international community. In the last six years or so however, we were dislodged from the top rank by Indonesia, but as we slid to second place, we continue to be the world’s biggest exporter of coconut oil. As second largest producer of coconuts in the world, the industry contributes heftily to the Philippine economy at an estimated $900 million annually.

A number of reasons can account for this. Coconut producing has not been viable for small farmers who have converted their land for other short-term produce for a quick turn-around. Coconut trees take several years to mature, leaving the small farmer without income in the interim, unless he practices systematic, intelligent and cost-efficient land use, and most of the small farmers in the countryside have not been indoctrinated into this.

Many farm owners have also succumbed to property developers that so many large tracts of land have been bulldozed and turned into subdivisions.

Indonesia, on the other hand, still has very large tracts of land ideal for coconut plantations, and they have wisely kept them as such. However, while they do process copra into coconut oil and other uses such as oleo chemicals, food applications, detergents, shampoo, biofuels, etc., their domestic consumption is also very high, so they ultimately end up with less to export like other coconut producing countries like Vietnam and India, for instance, leaving us on the top rung as the biggest coconut oil exporter.

Lately, newspapers report that the volume of our coconut oil exports fell by almost a quarter, down to 273,541 tons this time last year. Strangely though, the value of these exports tripled in the same period, up to US$177.77 million in April of this year compared to $102.03 million in April 2010. This is due to prevailing world market prices, so coco oil traders are happy with the rise in value of this export commodity. Their umbrella organization UCAP (United Coconuts Association of the Philippines) is busy looking for non-traditional markets which actually pay higher to export their coco oil to make up for the lost volume. 

Their target is to produce between 300 to 350 metric tons this year, 70 percent of which will be allotted for export and only 30 percent for local consumption. Lately, however, they have come into a snag. The province of Northern Samar is mulling to pass an ordinance to impose a P0.50 levy for every kilo of copra that is brought out of the province.

I was able to get a copy of the proposed ordinance introduced and sponsored by Board Member Albert A. Lucero of the province’s Second District. The ordinance seeks to “protect, develop and promote the coconut industry in the province”, Northern Samar accounting for 720,000 metric tons of coconut annually, making it the top coconut producing province in the country. The ordinance cited the prevalence of such coconut pests as Cadang-cadang and coconut leaf beetle as the main reason for the need to adopt regulations to protect the industry.

The proposed ordinance is supposed to control the import and export of coconut raw materials and finished products to avoid infestations of the pests and diseases. To be controlled are all coconut raw materials like coconut trees, the whole nut, copra, coconut shell, coconut husk, baled coconut fiber and coconut lumber. Any of these coconut raw materials, if sold to industries within and outside of the province in volumes that exceed 1,000 kilograms or 1 metric ton will be considered commercial quantity or volume, hence will be subject to levies.

There is a long list of regulatory fees for the export of coconut raw materials and finished products, but prominent in the list is the P0.50 levy on copra which is raw material for coconut oil. Others include P1.00/coconut seedling, P0.25/ whole nut or buko, etc. For incoming coconut raw materials and palm plants, the ordinance also seeks to impose P0.50/ kilo of copra, P1.5/ coconut seedling, P0.50/ buko, etc., with all revenues generated from these regulatory fees to be spent for the control of coconut pests, diseases and viruses.

The coconut oil producers are naturally up in arms against this ordinance. First, they say, the amount of P0.50/kilo of copra is too big a levy, and there is no way they can pass this on to the world market, which as it is, is very competitive. This being the case, they will have no choice but to let the coconut farmer absorb the levy costs by deducting this from their purchase price, leaving the farmer with the burden. Other coconut-producing provinces have no such levy, so the copra dealers can still go to these provinces for their copra supply. However, Northern Samar is still the biggest copra producer in the land, and this is a big source that can ultimately affect the volume of our coconut oil exports.

Henry Lao, UCAP Chair and VP for Trading & Operations of CIIF Oil Mills Group says this ordinance heavily favors the local oil mills in Samar, to the detriment of other big oil mills outside of the province who have to pay levy for coconut raw materials leaving the province. What could happen, according to Mr. Lao, is the big copra buyers will just opt to stop buying copra from Northern Samar farmers. When this happens, the farmers will have no buyers other than the copra buyers and oil mills operating in Northern Samar. This, he says, constitutes a monopoly.

While the spirit of the ordinance promotes the well-being of the coconut industry in Northern Samar, there is also a need to check for a healthy balance between this and the business implications, not just for the oil mills and copra traders but for the coconut farmers as well. If competition is killed and monopolies are put in place, it is the farmer that will ultimately bear the brunt. Consultations among the stakeholders should be considered, perhaps resulting to more viable solutions to the problems facing the coconut industry in the province.

Mabuhay!!! Be proud to be a Filipino.

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