INTRODUCTION Philippines is the number one exporter and supplier of CNO to the world market, specifically to the oleochemical industry Sharp increase

Transcription

1 PHILIPPINE COCONUT (LAURIC) OIL INDUSTRY: GROWTH OPPORTUNITY THROUGH VALUE ADDITION

2 INTRODUCTION Philippines is the number one exporter and supplier of CNO to the world market, specifically to the oleochemical industry Sharp increase in world prices in petroleum, expected a shift to natural-based raw materials, lauric oil (CNO and PKO) Is the Philippine coconut industry ready to take advantage of the opportunities and address the challenge posed by PKO? What ails the industry and how value addition can be a growth opportunity for the Philippine coconut industry 1

3 OVERVIEW OF THE PHILIPPINE COCONUT INDUSTRY 3.3 million hectares planted to Coconut trees 23.5 million farmers and other livelihoods that are dependent on the industry 2

4 2.4 million MT total copra production per year (average) 4.9 million MT total copra crushing capacity per year (average) 3

5 1.4 million MT total coconut oil production per year 82% is exported and 18% is consumed locally per year Gross receipts of $1 billion per year 4

6 OPPORTUNITIES AND CHALLENGES AHEAD Opportunities arising from the increase in demand A shift from petroleum based raw materials to lauric oil derived raw materials as a consequence of rise in petroleum prices. Growth in the production capacity of the oleochemical industry. Challenge to keep its leadership The gap between the prices of CNO and PKO becoming wider, challenging the coconut oil as the leading raw materials for the oleochemical industry. 6

7 The law on supply and demand made the CNO export a strategy in vain: 7

8 CHALLENGES AHEAD Coconut Oil, inspite of its premium properties, is made to compete with other common vegetable oil. Of all the world s vegetable oils and fats produced in 2007, the lauric oils represents 5% of the total supply. 8

9 CHALLENGES AHEAD (continued) The coconut production has been stagnant for the last 10 years Lack of proper incentives to attract new investment in spite of acceptability and popularity of the coconut as a renewable resource The coconut industry has not provided sufficient income to sustain the coconut farmers due to the present trading structure; the coconut landowners and farmers are not motivated 9

10 THE GOVERNMENT ACTION The government adopted a goal to increase production of 3.0 million metric tons in Phase 2 of the goal is to further increase the production to 4.5 million metric tons in Production as of 2009 is still at 1.4 million metric tons per year. 10

11 VALUE ADDITION THROUGH DOWNSTREAM PROCESSING OF COCONUT OIL, CAN IT BE THE ANSWER? 11

12 VALUE ADDING TO CNO, THE ONLY OPTION C O C O N U T O I L Fatty Acids Methyl Esters Fatty Alcohols Glycerine Bath Soap Metal Soap Sorbitan Esters Glycol Esters Mono/Di/Tri Glycerides Alkanolamides Sugar Esters Sulfo Methyl Esters BIODIESEL & LUBRICANTS Alkyl Sulfate Alkyl Phosphate Alkyl Glucoside Alkyl Amines Glycerol Esters 12

13 WORLD MARKET OVERVIEW WORLD ( SYNTHETIC NATURAL ) ALCOHOLS WORLD TOTAL DEMAND WORLD TOTAL SUPPLY NATURAL ( TYPICALLY LAURIC OIL BASED ) SYNTHETIC 2,500,000 MT PA 1,375,000 MT PA 1,125,000 MT PA ( ETHYLENE/ OLEFIN BASED ) 13

14 SUCCESSFUL BIODIESEL PROGRAMS IN THE WORLD ARE SUPPORTED BY GOVERNMENT 14

15 Biodiesel is the name of a clean burning alternative fuel derived from plant or vegetable oils (vegetable derived esters or VDE) that can be used as a blend with or as a total substitute for petroleum diesel. It can be used in compression-ignition (diesel) engines without any engine modifications. Biodiesel can be used as fuel for the transport industry, marine industry and power generating plants. 15

16 COCO-BIODIESEL DELIVERS MORE IN PERFORMANCE AND BENEFITS THAN DIESEL DIESEL PARAMETERS COCO- BIODIESEL BENEFITS 55 Cetane Number 70 Better ignition / acceleration 49 o C Flash Point 106 o C Safer handling & storage 0.05% Sulfur Content 0% No SOx emission 0% Oxygen Content 11% Combustion aid 3-4 cst Viscocity 2.7 cst Better atomization 3800 Lubricity (BOCLE) >7,000 Enhance fuel pump efficiency 360 o C T90 Temperature 316 o C Easily combustible less smoke 16

17 BIODIESELS ARE NOT CREATED EQUAL, CME IS SUPERIOR Quality Parameters Technical Specifications Soy-Biodiesel Palm-Biodiesel Coco-Biodiesel Cetane Number Viscocity (centistokes) 4.2 cst 5.06 cst 2.7 cst Cold Filter Plug Point +12 o C +14 o C -8 o C Solvency Moderate Moderate High Oxidation stability 3 hours 6 hours 16 hours Distillation at T90 o 352 o C 370 o C 316 o C Flash Point 157 o C 170 o C 106 o C 17

18 THE GOVERNMENT SUPPORTS THE RENEWABLE ENERGY INDUSTRY, MORE SPECIFICALLY THE BIODIESEL SECTOR On January 12, 2007, her Excellency President Gloria Macapagal Arroyo, signed into law RA No Biofuel Act of Mandatory use of coco-biodiesel nationwide with a blend of 1% for the first two years and 2% for the succeeding years for all petrodiesel sold in the Philippines. Additional blend percentage can be mandated by the National Biodiesel Board. Zero rated Specific Tax and Zero rated Value Added Tax per liter on sales of biodiesel. 18

19 SUSTAINABLE COCONUT OIL A PILLAR OF THE VALUE ADDED STRATEGY, A MEANS TO SUSTAIN GROWTH OF THE COCONUT (LAURIC) OIL INDUSTRY IN THE PHILIPPINES 19

20 SUSTAINABLE DEVELOPMENT PROGRAMS Adherence to the following principles in sustainable coconut oil production: Protection against poverty Environmental impact consideration Commitment to long-term economic and financial viability Efficient use of natural resources, maintaining priority on food before biofuels Responsible consideration of employees and of individuals and communities of farmers and millers Responsible development of new plantings 20

21 SUSTAINABLE DEVELOPMENT PROGRAMS (continued) Form a direct partnership with the Coconut landowners and Farmers to establish a sustainable development program to address the need to deliver the benefits of value addition. Formulate various farming innovations to realize long term programs for the coconut landowners and farmers. Establish a coconut plantation management and accreditation units to assist in mobilizing funds and promote investments in productivity enhancement programs. Establish a mechanism that will implement a coconut farm fertilization, rehabilitation and replanting program taking into consideration the environmental protection. 21

22 FARMERS COMMITMENT TO SUSTAINABLE DEVELOPMENT Coconut farmers should do their share by : Getting organized and promote group action through cooperatives or equivalent organization. Creating a business environment that will lead to producing competitive products and efficient services. Committing to value addition as a means to achieve progress through adaption of best practices. 22

23 FARMERS COMMITMENT TO SUSTAINABLE DEVELOPMENT (continued) Coconut farmers should do their share by : Commitment to address the basic daily necessities (food, shelter and clothing). Providing other equally important benefits such as education, health care and other common needs of the members. Commitment to release and free themselves from any form of bondage. 23

24 FARMERS MOTIVATION TO ACHIEVE PROGRESS The road map to motivation, achieving progress: Farmers should: Generate incremental annual income as a result of value addition to their products. Share in the results of the more efficient plantation management unit through profit sharing in their organization or cooperatives. Increase the value of the land as it becomes more productive. Achieve income diversification by moving towards greater use of the land through inter-cropping. 24

25 A SIGNIFICANT CONTRIBUTION TO THE ECONOMY Increased purchasing power of the 20 million coconut farmers and others that depends on the industry. Continuously generate employment from land preparation, planting, harvesting and processing of the coconut. Encourages more investments to address the development of the coconut industry. 25

26 A SIGNIFICANT CONTRIBUTION TO THE ECONOMY (continued) The use of coconut oil and its derivatives protects the environment. Increase foreign exchange earnings through increased value of export of oleochemicals derived from coconut oil. Foreign exchange savings by substitution of petroleum diesel and petrochemicals (inputs to the manufacturing sector). It creates an engine for growth of the coconut industry. 26

27 Coconut Industry Research Institute Mission: To build the bridge to prosperity for the coconut farmers and the industry Founded by individuals with a common desire to uplift the livelihood of the coconut farmers through sustainable growth programs. Professionals and consultants with a combined experience of over 30 years in coconut and related industries. Has a network of consultants who are highly qualified/experienced in its own field of specialization that can provide management and technical services needed by the industry.

28 ADOPTION OF INNOVATIVE FARM MGMT. TOOLS (Re-engineering of the Coconut Industry) Agro Technical Services Member Coconut Farms Production & Quality Control Services Coconut Industry Research Institue Marketing & Logistics Services Coconut Farmers Cooperative Member Coconut Farms Financial Services and Monitoring Intercrop and Livestock Advisory Member Coconut Farms FARM MANAGEMENT SERVICES Technical Services - Modern farm techniques to increase production. Production and Quality Control Services - Control of production yields and quality of copra. Marketing and Logistics Services - Long term supply contract with major users of copra. Financial Services - Raise funds to finance coconut farm's productivity program. Monitoring Services - Transparency of funds management to ensure success of the program. Intercrop and Livestock Advisory - Initiate intercrop and livestock to increase income. 28

29 ODA/MULTI- LATERAL FUND SOURCE COCONUT INDUSTRY COOPERATIVE GROWTH FUNDS (INVESTMENT COMMITTEES) LONG-TERM FUND SOURCES (TRADITIONAL FINANCIAL INSTITUTION) OBJECTIVES: 1. To provide a continuous liquidity mechanism from coconut farmers to the sale of final value added coco-derived products. 2. To safeguard that the benefits of value added products flows back to the coconut farmers. COCONUT INDUSTRY RESEARCH INSTITUTE (FUND MANAGER) COCONUT FARMERS' COOPERATIVES Legend: Investment Flow Repayment Flow Product Flow CIRI Services COCO-OIL REFINING AND SPECIALTY FATS COMPANIES (international & domestic customers) TOLLING AGREEMENTS FOR CNO AND OLEOCHEMICALS PROCESSING OLEOCHEMICALS/ BIODIESEL COMPANIES (international & domestic customers)

30 ACHIEVING GOALS Phase 1 We should be able to attain the government goal to increase CNO production of 3.0 million metric tons through fertilization of existing coconut trees and efficient farm management by the year Start the replanting to replace the senile coconut trees. Phase 2 The next goal is to further increase the production to 4.5 million metric tons in the year 2015 by expanding the coconut plantation. 30

31 MARAMING SALAMAT (Thank you) 31