Coconut industry: The story of the “Tree of Life”

 

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Magellan's Cross in CebuEarly BeginningsCocos Nucifera, better known as the coconut, has been with us since our earliest forebears first inhabited this archipelago.  When the first Western adventurers stumbled into our shores, their scribes recorded encounters with brown-skinned natives who derived their basic needs in life from a single source they called the “Tree of Life.” 

What made the Spaniards compare the coconut with that biblical tree in the Garden of Eden?  Our ancestors must have feasted the Spaniards with tuba and a variety of dishes called guinat-an, showed them houses and simple amenities made out of coco-materials and explained the numerous other uses of the products of that life-sustaining tree.

Our ancestors found many uses for practically every part of the coconut tree.  From it they derived food and ingredients for delicious menus; fresh drinks with medicinal properties for curing renal disorders; alcoholic drinks and vinegar; soap and hair conditioning oil; durable building materials; fiber for cordage and mattress; materials for broom, basket, mat and hat — in short, just about everything they needed to live in a world uncomplicated by Western ways and habits.

The early Filipinos treated their coconut primarily as an abundant, renewable source of their basic needs in life and only secondarily as a merchandize for exchange.

The Market Begins.  Toward the middle of the 18th century, the methods of production both in agriculture and industry began to change in Europe.  This period marked the beginning of the so-called Early Industrial Revolution.

By early 1800s, soap and margarine producers in England got interested in the distant coconut tree.  For health and economic reasons, these producers decided to shift from animal fats to vegetable oils.  Early on, they had discovered that of all the then known sources of edible oil, coconut was the most saturated and economical to process.  This was now the 19th century and although the period saw the resurgence of imperialism, trade liberalization was on the rise among the European powers.

In the Philippines, the Filipino peasant was by now getting absorbed into the emerging world market as a colonial producer-supplier.  Through Spain, Great Britain and the other European powers started buying coconut products, principally copra which is more of a raw material than a processed product.  Even today, Europe remains a top importer of coconut oil, taking in 46% of the total world imports of coconut oil, with the Philippines supplying 25% of all Europe-bound coconut oil.

The entry of the Americans in the Philippines ushered in the full-blast exploitation and commercialization of the coconut.  By 1919, coconut oil accounted for an all-time high 89% of the total merchandize exports of the Philippines.  Today, the Philippines supplies some 50% of the total world exports of coconut that flow into the U.S.A.

The “Tree of Life” and sustenance had thus become a commodity of exchange, with the Filipino peasant Mang Pedring as a peripheral, short-changed partner in a modern game of buying and selling.  The game included as players:  Mang Pedring as producer-supplier, his landlord as master and taxman, his suki as buyer-creditor, and other unknown entities who somehow dictated prices but whose dynamics he could not fully understand.

Oil Refinery PlantIndustry of Immense Wealth and Grinding Poverty.  The coconut is undoubtedly an industry of immense wealth.  Through the years, billions upon billions of dollars, pounds, marks, guilders, yens, euros and pesos have been produced by that industry on bent backs, blood, sweat and tears of its populace, now numbering some 25 million Filipinos. 

Even today, and notwithstanding its consistent decline in production, markets and prices, the coconut industry remains our top agricultural exporter with an average annual export revenue of close to US$900 Million (or about PhP43 Billion at today’s rate).

Ironically, poverty is most widespread in provinces where coconut farming is the main source of income.  In most coconut-producing areas, a medieval kind of relationship and sharing arrangements between the landlords and the tenants still persist.  In many areas, a sharing arrangement on a 60-40 basis in favor of the landlords is not uncommon.  In some it is 50-50.  In others, it is a 70-30 arrangement, also in favor of the landowners.  In most cases, the harvesting cost is borne by the tenants, in some all the expenses.

It is also not uncommon for coconut farm workers to be paid only 50% of the legislated minimum wage rates.  Due to limited employment and livelihood opportunities in the rural areas, these coconut workers are often compelled to accept lower wages in order merely to survive.  Still in many areas, pakyaw is commonly resorted to by landlords as a means to cut down on costs particularly when prices of coconut decline.

Small coconut landowner-operators who number in the vast majority are not much better off either.  In fact, the mean family income of these small coconut farmers has been consistently below the mean family income of all agricultural and non-agricultural families.  Averaging 4 hectares or less in size, these owner-operated coconut farms cover nearly 1.9 million hectares, representing roughly 60% of all coconut farms in the country.

De-husking coconutToday, some industry analysts roughly estimate that a whooping 75% of the total coconut industry income go to no more than 25% of the coconut industry population:  the landlords, overseers, traders and processors.  In contrast, the broad majority of small coconut farmers, tenants, lessees and landless farm workers, comprising 75% of the industry’s population, have to share among themselves the remaining 25% of the industry’s income.

This truly yawning gap between the few rich and the many poor is what should precisely wake us up to the realization that in the Philippine coconut industry today, the issue is not just the disparate distribution of that industry’s wealth.  What is worse is that there are so many poor because there are so few who help themselves to so much of that wealth.

The Price Mystery.  Why is Mang Pedring unable to fetch a higher value for his coconut in the market?  For one, the end-buyer of his coconut is neither a Filipino in his neighborhood nor his suki or oil mill some distance from his farm.  Roughly 80% of Philippine coconut products eventually end up in the inventories and factories of a foreigner who, for the most part, lives in Europe or in the United States.  And he buys coconut principally, though not soslely, because of his need for fats and oil.

Secondly, apart from coconut oil, the end-buyer can choose from more than a dozen sources of fats and vegetable oil in the market.  In the past the end-buyer would prefer to by coconut oil instead of soybean, palm, sunflower, rapeseed or other edible oils.  This is due to the fact that coconut oil is a premium oil with superior and versatile qualities such as high protein content, high energy, high fiber and very low cholesterol.  And yet, over time, the share of coconut in the edible oil market kept dwindling until it plummeted to a mere 3% today, far surpassed by palm oil (41%) and soybean (22%).  When the supply of coconut is not constant, either in quantity or quality or both, the end-buyer would shop around for substitute, and find he would.  The substitutes may be inferior, lacking in the superior and versatile qualities of coconut oil but, nonetheless, they are ready substitutes, cheaper and in abundant supply.

The weakened position of the coconut in the world market is further aggravated by the protectionist policies adopted by the countries of the end-buyer for the benefit of their own vegetable oil producers.  In the U.S. market, the American Soybean Association launched a massive, highly damaging smear campaign against “tropical oil”, insidiously claiming that coconut oil raised cholesterol level and caused heart ailments.  Such a misleading but unfortunately damaging claim caused a further decline in the U.S. imports of coconut oil. 

For its part, Europe passed strict laws against aflatoxin-contaminated Philippine copra.  Aflatoxin, a poison from molds, was claimed to be found in large quantities in Philippine exports of copra meal and copra cake.  The poison comes from yellow-green mold (better known as amag), a fungus that naturally grows on copra due to improper drying and storage.  As a result, the end-buyer started paying less for Philippine coconut oil.

The truth of the matter is that Mang Pedring, for decades, had been quite negligent in taking care of the quality of his copra because traders, millers and exporters never distinguished between good and bad copra and bought them all up just the same.  The industry itself did not bother to institute and enforce quality standards for copra.  Inevitably, the problem would have to reach crisis proportion some day.  Unfortunatelly, that day came yesterday.

Translated into our market, the domestic copra price is squeezed down further by an army of profit-hungry middlemen, leaving the poor Filipino farmer with the lowest possible price for his copra.

Something is wrong when coconut, which is scientifically proven to be a natural health food, is now treated as a health risk by some foreign buyers.  Something is ironically wrong when so rich an industry is indifferent to the grinding poverty of the broad majority of its populace.  Something is definitely wrong when our economic planners consistently overlook an industry which is indubitably the comparative advantage of this nation vis-a-vis the rest of the world. 

Comparative Advantage.  In a world characterized by global competition, every nation must determine and develop to the full its peculiar, distinctive advantage, or else be drawn into competion with a handicap.

What really constitutes our comparative advantage vis-a-vis the rest of the world?  Is it the electronics industry?  Or the garment industry, perhaps?  These industries are, no doubt, great foreign exchange earners.  But these industries are also so import-dependent for their raw materials and other production inputs that the value added to their products is less than 10%, most of which representing mere savings in terms of labor costs.  Which is not to say that we should not have these industries at all.

What do we have in abundance which very few countries have to the same degree and which has great protential as a complete engine of development and growth?  Banana, sugar cane, pineapple, mango?  These agricultural products are also excellent foreign exchange earners.  But not nearly as abundant and endowed with literally a thousand and one commercial and industrial uses to be a complete engine of development and growth.  Which is not to say, too, that we should not support these agricultural prooducts.

Coconut Products-2But take another look at the coconut.  Our combined export of coconut products has consistently stayed on among the top ten merchandize exports of the country.  Coconut oil alone has remained up to now the country’s number one agricultural export in terms of value, accounting for around 67% of our total agricultural exports and surpassing all other agricultural exports combined.  Coconut is still the largest, in fact number one, “net” foreign exchange earner of the Philippines.

We could be the oleochemical center of the world if we would only, as we must, graduate from a mere exporter of coco raw materials and become, at last, a self-reliant, value-adding economy with more than even chances for flourishing in the global market place.

In the past, we had the penchant of pursuing industrialization strategy which had no indigenous base.  We imported rolled steel sheets, corrugated them in the Philippines and called it industrialization.  We imported chemicals, shook them in the Philippines and called it industrialization too.  We keep forgetting that agriculture is the mother of industry.

We made soap by importing hard alkyl benzyne (HAB) at great cost to our foreign earnings instead of simply using coco-fatty alcohol (CFA).  While many countries had already banned the use of HAB as a dangerous non-biodegradable pollutant, we persisted in ignoring our replenishable, biodegradable coconut which was, and still is, all around us in 68 out of our 79 provinces.

In fact, our industrialization aim is never attained and our economy is still underdeveloped because we hardly use our coconuts.  While other coconut-producing countries like Indonesia, India and the South Pacific group use their coconut to as much as 85%, our domestic utilization of coconut up to now is a low 20%. If we could consistently increase our domestic utilization of coconut, we would achieve many things — rural industrialization, for one.

Rural Industrialization.  Rural industrialization is possible by empowering small coconut farmers to own integrated processing plants through a corporation or entity owned by several coconut cooperatives.  This would provide us with an excellent opportunity to disperse industries and, thus, pump-prime development in the countryside.

Coconut oil expeller machineBased on 300 productive days in a year and the current production average of one ton copra per hectare, the initial processing capacity of a nucleus oil mill for such a venture, as an example, could be 50 tons per day, which can be achieved by installing two 25-ton expellers within a consolidated estate area of about 15,000 hectares.  Such a consolidated estate could be formed by organizing fragmented holdings of small coconut farmers into a producer-supplier cooperative that would produce and provide the nucleus oil mill with steady and constant supplyy of copra at a much improved price.

Around such nucleus oil mill can be established small-to-medium scale satellite enterprises that will feed on the output of the nucleus oil mill and produce a variety of value-added downstream products that would, in turn, provide employment and livelihood opportunities for the people living in the area.  Based on the degree of success, the estate can be enlarged by just adding more 25-tonner expellers.

Coconut Products-1Value-Adding Industries: The Chances and Challenges of the Coconut Industry.  Envision, if you will, a dispersal of medium-size integrated coco-processing plants throughout the entire coconut-growing areas in the country.  And we are talking here of not just producing raw materials for the volatile world markets but cooperative value-added production of a diversified range of finished products made out of coconut.

The food uses of coconut, alone, can be quite diversified and our domestic market of around 90 million people is not really a small market.  The challenge now is to develop efficient methods of production that are capable of delivering volume quality and affordable prices.

Edible oil, for instance, is an excellent example of such food uses.  At present our annual per capita consumption of edible oil is only 7.5 kilograms.  This figure is still below the 10.0-13.2 kilograms of nutrient requirement set by the Food Nutrition Research Institute of the Philippines.  Considering a 2008 population of around 90 million Filipinos, a maximum 5.7 kilograms increase in our per capita consumption of edible oil would easily generate an additional demand of 513,000 metric tons.

There is also a growing global outcry today for the use of bio-diesel instead of fosiil fuels.  Keeping the air clean is the principal consideration for this.  And if bio-diesel from coconut can gradually replace an increasing percentage of our local diesel and bunker oil requirement, we would acquire another safety net in the event of a sharp decline in the world demand and prices for coconut.

In still another area, the coconut husk that our coconut farmers tend to just throw away today is an excellent, environmentally friendly material:  as natural fiber for car seats and upholstery, as soil conditioner and fertilizer, as material and binder for composite panel board, as fiber for cordage, and as a versatile material in a host of other industrial products and applications.  When many coirflex centers are set up in the proposed consolidated estates and fibrillators are dispersed to the various cooperatives in designated catchments areas, the realization that waste is wealth can be quite dramatic and liberating.

While we should not neglect and must, in fact, expand our foreign markets for coconut, only a developed and dynamic local market will provide us with a safeguard or cushion against any decline in our world markets or even against predatory pricing and foreign protectionism.

There are many other food, industrial and medical uses of coconut.  For reason of time, I merely described a few of these — enough to illustrate that a coconut-based industrialization can jump-start and sustain our economic development.  And the political will to achieve it is quite badly needed today.

Coco SunriseThe Future of the “Tree of Life”.  The prospects for coconut exports are brighter than ever and coconut might as well be the sunrise industry and the champion foreign-exchange earner of the Philippines for the 21st century. This bold projection has a lot to do with a planet that demands ecological consciousness from its inhabitants.  As more and more people of the world become concerned with environmental degradation and pollution caused by fossil fuels and the production of plastics and other non-biodegradable materials, there would be an increasing demand for substitute replenishable and biodegradable materials to continue and sustain industrialization in all parts of the world.  In a situation like that, the demand for lauric oil in the foreseeable future will be more than supply.  And of all the known sources of lauric oils, coconut is the most highly saturated, versatile and easy to process.

Role of Government.  The idea of a government co-opting with a private industry to achieve shared goals ang objectives is not new.  So many governments are providing massive state support to their comparative advantage industries that they are sometimes referred to as Japan, Inc., China, inc., South Korea, Inc., Taiwan, Inc., Singapore, Inc., and so on and so forth.

Philippine Coat of ArmsThe idea is not more government per se but more government support for an important industry that badly needs it and an industry which is badly needed by more than a quarter of the nation’s population.  Do we have a Philippines, Inc. on coconut?  It is, after all, our comparative advantage vis-a-vis the rest of the world.

At the same time, the government must dispense social justice where it is due and badly needed.  In the exercise of this moral, legal and constitutional mandate, the government must always adopt a preferential bias in favor of the many that are poor.  It must however be clarified that such a policy, indeed, allows the rich to get richer:  however, on the prosperity and not on the poverty of the many. 

For the government to will the ends of a massive state support to an important industry, it must also will the corresponding means to realize such a policy in the form of a strengthened state agency created solely and authoritatively for that purpose.  Such agency must be set up to promote, develop, nourish and sustain; not to compete with or hinder private sector activities. 

So many prospective and strategic coco businesses are unable to materialize because the private sector is either unwilling or simply not able to pioneer and develop.  This is the case with coco-diesel, certain oleochemicals, the establishment of modern seed gardens, research and development, and many other such pioneering activities.

It must however be clear that, by operation of law, once an economic coco enterprise is maturely developed, the government will automatically withdraw in favor of the private sector.  The government must however be relied on to support and regulate until pioneer enterprises find self-sustaining success in the domestic and international markets.

 
 Published 10 July 2009
Pasig City, PHILIPPINES
 

A sampling of the commercial and industrial uses/products of the Coconut Tree 

 

 Buko (young coconut) juice, the quintessential tropical refreshment drink, which is also good for renal disorder.

 

 

 

Copra— dried coconut fruit meat which is the most saturated in edible oil (about 70% oil content) among all known sources of vegetable oil.

 

 

 

 Coconut refined cooking oil

 

 

 

The “Coconut Palace” in Manila.  Built in 1978 as a showcase on the versatility of the coconut tree and its viability as a source of materials for housing and construction, furniture and handicraft products.

 

 

 

Coco-biodiesel (coco methyl ester, or CME), a renewable, biodegradable and eco friendly fuel of the future.  It emits less smoke and is almost sulfur free.  Probably the next big thing after coconut oil (currently the country’s top agricultural export).

 

 

 

 Coconut shell briquette charcoal — rated by the leading manufacturers of filter elements in the world as the best carbon-based material for water and air filtration system because of its dense atomic particles.

 

 

 

Versatile coconut milk for cooking, baking and pastries

 

 

 

Coconut husk fiber, a versatile eco friendly material:  as natural fiber for cordage, car seats and upholstery; soil conditioner and fertilizer; and material for composite panel board. 

Cold-pressed coconut virgin oil, dubbed as the healthiest oil on earth and the safest to cook withIt does not contain trans fatty acids and does not break down even at high temperature.  Also used to produce pharmaceutical and cosmetic products.

 

 

 

Ingredient for a wide variety of meat, fish and vegetable dishes

 

 

 

Coconut lumber for housing and construction, furniture and handicraft products

 

 

 

Vinegar from the sap of the coconut tree, a key ingredient of the world famous “adobo” meat dish.

Bath soap made of biodegradable coco fatty acid (CFA) from coconut

 

 

 

Furnitures made of coconut wood

 

 

 

Coconut hand and body moisturizing lotions

 

 

 

Ingredient for a wide variety of baked products

 

 

 

Cordage made of coconut husk fiber

 

 

 

Dessicated coconut — shredded (or flaked, or ground) and dried coconut meat used in a variety of recipes such as cakes, pastries and cookies.

Composite panel board made of coconut husk fiber for housing and construction

 

 

 

Ingredient for pastries and confectioneries

 

 

 

Coconut hair conditioning shampoo

 

 

 

Unique and eco friendly tiles and panels from coconut shells and husks

 

 

 

 

 Ingredient for make up remover and a host of cosmetic and beauty  products

 

 

 

Nata de coco (Spanish for “cream of coconut”), a chewy, translucent, jelly-like food product produced by the fermentation of coconut water.  Originating in the Philippines, nata de coco is commonly sweetened as a candy or dessert.  Also used in pharmaceutical products as tablet coating agent.

 

 

 

 

 Coconut shells, husks, leaves and wood used as materials for a wide variety of handicraft products. 

 

 

 

 Lambanog liquor, a sampling of a variety of liquors, wines and fermented beverages derived from the sap of the coconut tree.