Agriculture

Global demand trends for coconut marketing

Coconut is unique, producing a chest of products and byproducts with distinctive applications at home and in industry.

Interestingly, consuming markets may be credited for the development of most of these products and byproducts for specific uses.

Coconut oil to date is the industry's primary dollar revenue generator particularly in origin countries.

In the Philippines, it ranks fourth in total merchandise export after electronics, garments, and machineries and transport equipments.

Major markets of coconut products are the United States and the European Union of 25 countries. In Asia, Japan is the leading market.

However, new products have evolved which are beneficial to health and the environment such as virgin coconut oil, biodiesel, and geotextiles whose market prospects are huge both in the domestic and foreign markets.

Obviously, billions more of coconuts are needed to satisfy the requirements of the various processing sectors. This presentation, however, will focus only on major products, particulary coconut oil.

Production

Three countries namely, Indonesia, the Philippines and India dominate the production of coconut in world and jointly account for 73 per cent of world coconut harvest.

Average annual figures based on APCC data show combined output of these countries at 44 billion nuts as against at 60 billion world total. Indonesia takes the lead with 18 billion nuts, trailed by the Philippines with 14 billion and India with 12 billion.

Production of coconut has seen a modest rise compared to other oilseeds in the world partly due to it being a perennial crop as opposed to seasonal crops whose output can be more flexible depending on market needs.

Four products or group of products dominate coconut trade in the international market namely coconut oil, copra meal, desiccated coconut and oleochemicals. In the domestic market like in the Philippines, there are five including copra which are the most widely traded commodity in the country.

Apart from these, however, a wide range of coconut products like coconut shell charcoal, activated carbon, coir products, coconut water, natade coco, coconut vinegar, coconut sugar, coconut wine to name a few are being manufactured both for the local and export markets providing added value to the coconut.

In the Philippines, products other than the major ones accounted for 9.1 per cent of gross export receipts from coconut of US$ 841 million in 2004.

Export markets

The United States and Europe are still the primary markets for coconut products particularly coconut oil, desiccated coconut, copra meal and oleochemicals.

In the case of coconut oil, the US and EU take in more of crude coconut oil and Cochin oil types. The limited volume of RBD coconut oil export goes mostly to Asian countries primarily Japan and China.

Similarly, desiccated coconut export goes mainly to the US and EU which together accounts for 47.3 per cent of total world import of desiccated coconut.

Among the major export products, desiccated coconut has the most diversified market. Last year, Philippine shipment of desiccated coconut went to 71 country destinations. Copra meal export, on the other hand, has shifted from Europe which used to be the leading export market, to Asia specifically South Korea and Vietnam.

The swing has been largely the result of stringent allowable limited for aflatoxin cove loping livestock industry in Asia.

Export of oleochemicals which comprise coco fatty alcohol, coco fatty acid, methyl ester and glycerin also go mainly to the US, Europe and China for soaps, detergents, surfactants and toothpaste industries.

Export to other countries, especially to the Middle East, of food products also has seen increasing trend fuelled mainly by migrant labour from Asian countries.

Some countries make it more difficult for products to penetrate in to their markets either because of regulations, national products standards, or health issue. A particular example is the long standing prejudices against coconut oil the US as a result of its being saturated fat.

Demand for coconut oil products

Coconut Oil competes with 16 other fats and oils in the world market where leaders are soybean oil, palm oil, sunflower oil and rapeseed oil. As such, factors affecting demand for fats and oils like population, income and prices also affect coconut oil demand.

World population continues to grow steadily although at a much slower pace lately; therefore, demand for coconut oil should be headed for growth as well.

In absolute numbers, Oil World data show this year's population could reach 6.455 billion, moderate rice by 76 million from the previous year at 6.379 billion.

More than half of this total (59 per cent) is in Asia at 3.836 billion of which the bulk are in China at 1,299 billion and India at 1.097 billion.

A growing income improves purchasing capacity that fuels demand for vegetable oils, particularly in developing countries of Asia notably in China which has seen significant improvement in GDP of 14.5 per cent from 8.3 per cent in 2002 to 9.5 per cent in 2004. Per capita consumption rose correspondingly by 16.7 per cent to 18.9 kilos per year in 2004 from 16.2 kilos in 2002.

Russia and Ukraine had more dramatic growth in GDP which were matched by substantial growth in per capita consumption.

Russia's GDP jumped by 44.9 per cent from 4.9 per cent in 2002 to 7.1 per cent in 2004 and hiked its per capita by 8.5 per cent from 19.9 kilos to 21.6 kilos. GDP growth in Ukraine leaped from 4.9 per cent to 7.1 per cent and considerably boosted per capita by 15.5 per cent from 15.5 kilos to 17.9 kilos.

Countries with low per capita at much below the world average of 20 kilos such as Vietnam at 5.1 kilos, the Philippines at 7.7 kilos, Bangladesh at 7.4 kilos as well as the net vegetable oil importers have much room for expansion and would respond favourably to economic growth.

In addition, changes in dietary patterns such as preference for western fast-foods as well as convenience food when combined with income growth would heavily impact on demand.

Demand is price sensitiveness especially for developing countries. Huge premium of coconut oil vis-a-vis palm oil has encouraged consumption in our country as reflected by our growing import.

Conversely demand diminishes when prices go up. In consuming markets, coconut oil is used both for food and non food products although the greater part is utilised in non-food, specifically in the oleo chemical industry because of its important properties due to the high content of shorthand medium chain fatty acids for which no other source in commercial qualities have been found as yet, except for palm kernel oil. Among food items that may contain these oils are spreads, cocoa Butter substitutes, nondairy creams and coffee whiteners.

In the Philippines, it is used to large extent as cooking oil. A talk on demand for coconut oil would be incomplete without mention of palm kernel oil, both oils being almost interchangeable in many applications because of their similar fatty acid composition.

(Coco Market Focus July 2007)