Bernardo M. Villegas
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Addressing Poverty of Coconut Farmers (Part 1)

          The recent appearance in the stock market of AXELUM Resources Corporation,  a company based in Northern Mindanao processing high-value coconut products,  is a breath of fresh air in the otherwise depressed coconut industry in which farmers are among the poorest of the poor in the Philippines.  The most recent news is that the company just completed a P250-million project to expand its spray-drying line in its Misamis Oriental plant, which is seen to double the company’s capacity in producing coconut milk powder.  Together with other coconut manufacturers diversifying out of coconut oil (the lowest-value product coming from copra), AXELUM is leading the way to improving the incomes of the coconut farmers by  exploiting the increasing demand all over the world for, not only coconut milk powder, but also for coconut cream, coconut water, coconut sugar, reduced fat coconut, RBD (refined, bleached deodorized) oil, and virgin coconut oil, in addition to the traditional desiccated coconut that the Philippines has been exporting for decades outside of the low-value  coconut oil whose  price has tended to wildly fluctuate as it has numerous substitute products like palm oil, soy bean oil, sunflower oil, etc.  It is about time that many more forward looking entrepreneurs follow the example of AXELUM in increasing significantly the export of the non-traditional coconut products in order to maximize the value the country can get from this “tree of life” while at the same time assuring that the coconut farmers can get an increasing share of the increased revenue. A similar venture is Cardinal Agri Products, Inc. in Brooke’s Point, Palawan that has also partnered with thousands of small coconut farmers to produce Virgin Coconut Oil, Coconut Milk and Coconut Water exported to the US and other countries.

         Together with subsistence fisher folks and landless farmers, coconut farmers are among the poorest of the poor in the Philippines.  There are about 3.5 million of them eking out a meager living selling their copra to traders who squeeze whatever little value they derive from highly unproductive farms.  There are 324 million coconut trees with an average yield of 18 to 20 nuts per tree from an average of 100 trees per hectare. There are 3.25 million hectares of land planted to coconut all over the country, accounting for 27% of the 12 million hectares of agricultural farm lands.  Of the 79 provinces in the country, 68 are coconut producing areas, with Mindanao accounting for 48% (1.6 million hectares) of coconut farms.  It is not surprising that the highest poverty incidences (40 to 60% of the population) are found in Mindanao, as compared with the average of 21% for the whole country and 4% for the National Capital Region. Without the help of the Government and of large business, there is no way coconut farmers can improve their plight of dehumanizing poverty.

         The Philippines exports a wide variety of coconut products.  In 2017, the value of traditional coconut products reached almost $2 billion while the non-traditional exports were worth $309 million, or a total of $2.3 billion.  Over the past ten years, coconut export values fluctuated but grew by an average of nearly 10 percent per year, with traditional exports growing by 9 percent and non-traditional exports by almost 25 percent per year.  Consequently, the share of traditional exports to the total value of coconut exports declined from 96 percent in 2008 to 86 percent in 2017 while the share of the non-traditional exports increased from only 4 to 14 percent in the same period.  The traditional exports are dominated by coconut oil (CNO), representing a share of 75 percent to the total value, with desiccated coconut as the next biggest with 13 percent.  The others (copra, copra meal, coco shell, charcoal, activated carbon and oleochemicals) represented the remaining 12 percent. 

         There is no question that the industry would benefit from more large businesses following the example of AXELUM or Cardinal Agri Products in exporting higher-value coconut products like coconut water, coconut milk powder, and virgin coconut oil (VCO).  Exports of these non-traditional products grew by almost 25 percent annually during the period 2008 to 2017.  Growth was mainly driven by coconut water, which expanded 132 times on volume and 172 times on value during the same period.  Large economies like China and the United States can gobble up any amount of coconut water we can produce for health reasons.  The exports of Virgin Coconut Oil increased by 46 percent per annum on volume and 53 percent per annum on value during the same ten-year period.  The US absorbed the bulk of these exports.  Coconut milk powder exports grew by 38 percent per year on volume and 60 percent per on value during the same 2008 to 2017 period.

         The case of AXELUM Products is worth scrutinizing.  It is experiencing a high double-digit growth of 28 percent per annum in its revenue as it is getting more market share from other players by capitalizing on its competitive advantage of having operations in the U.S.  AXELUM is also into retail, especially under private labels (supermarkets).  It is benefiting from the shift in market buying habits as more people are cooking their own meals.  The retail sector is capturing the market for millennials who are buying more natural products. Coconut water demand growth ranges from 12 to 20 percent annually.  Vita Coco, the world’s largest coconut water brand, has a market volume of 120 million liters per year supplied by eight to nine manufacturers including AXELUM (20) percent and Century Pacific.  Vita Coco is targeting 150 million liters in 2019 while trimming down the sources of supply to only five manufacturers in the future.  The biggest global market is the US with 50 percent of total sales, followed by Australia with a share of 15 to 20 percent.  A related product which has potential is coconut water concentrate which is growing at ten percent annually.  Coconut milk is now being used as an alternative coffee creamer with AXELUM as a main supplier to the US market.  Gluten and dairy-free coconut milk is a growing and an acceptable substitute to cow’s milk for consumers who are lactose-intolerant. (To be continued).