Economic Potential Unlocked in Coconut

Growing in tropical locations worldwide, coconut has life-giving powers to populations in developing countries in both economic and social terms. This widely known palm’s scientific name Cocos nucifera means “grinning face bearing nuts” and is often referred to as the “tree of life”. Two main varieties, the tall and the dwarf, are grown commercially for the high oil content of their copra, which is essential in the production of food and non-food products. Major production areas are mainly located in wet tropical coastal regions of Southeast Asia such as in the Philippines, Indonesia, India, Sri Lanka and Malaysia, which together account for 75 percent of global coconut production output.

More than the promise of its healing powers as many of its parts, from coconut oil to coconut water, are known for their biomedical properties, coconut is seen to hold the key to unlocking the potentials for reducing poverty in rural farming communities. No wonder it is also referred to as the “tree of abundance”. Its ripe fruit has a hard shell covered by a fibrous outer coat. In the center lies the edible kernel. The coconut shell has a layer of “white meat” which is edible and contains oil when processed. The hollow within the shell has a slightly sweet liquid often used as beverage and is known to be rich in minerals. Every part of the coconut palm can be used as food, drink, fuel, animal feed and raw materials for shelter. New products and technologies are being developed and discoveries so far prove to be promising. Specialized agencies in the Philippines like the Philippine Coconut Authority lead efforts in discovering the diverse uses of coconut, one of which is source of renewable energy.

The processed coconut can produce four main product streams: 1) soft outer shell, 2) hard inner shell, 3) copra, and 4) coconut water. The soft outer shell can produce fiber for ropes and mats, husk or peat for potplants and substrates, geotextile, charcoal, particle board, molded rubberized coir, community pots for ornamental plants, among others. The hard inner shell is the source of charcoal, activated carbon, briquettes, novelty items and biomass energy. The copra itself can produce edible copra, frozen coconut flakes, medium-fat DCN from sapal, coconut oil, dried buko strips, canned buko in syrup, snack food, soy sauce type condiment, medicinal and nutritional products, coconut milk, frozen pasteurized milk, canned sterilized milk, powdered milk, coconut cream, coconut milk beverage, coconut jam, fermented dairy type products, coconut syrup, skim milk drink, powdered skim milk, simulated meat and coconut-honey, to name a few. The coconut water is used as a therapeutic drink mainly as diuretic. It is also commercially available as a refreshment, sports drink (because it contains electrolytes), vinegar, sparkling wine, coconut champagne, yeast and coconut water concentrates.

Among the four product streams, copra stands out for its most number of value-adding characteristics. Copra products range from cosmetic and pharmaceutical high-value items to invaluable ingredients in the food industry. Next is coco water, which is a principal ingredient of numerous beverages from sports to alcoholic drinks. The hard inner shell product range is third in importance, mainly for the production of activated carbon. Finally, what used to be regarded as waste, the soft outer shell is now increasingly in demand for its applications in agriculture, bioengineering, soil and erosion control. The supply of coconut and byproducts mainly comes from Southeast Asia and Pacific regions. World production has decreased globally since 2002, mainly as a reaction to oversupply. However, biological stress is also another reason for the dip in production. Such was the case in the Philippines after it experienced a period of high productivity from 2000–2001. In Southeast Asia and the Pacific, processing of coconut products takes center stage. The Philippines, Indonesia and Sri Lanka dominated the desiccated coconut market. The region also accounted for 89% of coconut cake and 88% of coconut oil production. Among the major producers of coconut coir are India and Sri Lanka. Meanwhile, the Philippines is taking position to catch the next wave of global demand for coco coir.

The main consumer of coconut products, particularly coconut oil and copra, remains to be the United States. In the European Union member countries, the Netherlands serves as main port for the importation of these products, which are then distributed to other countries. Refined coconut oil enjoys high demand in France and Germany, with its diverse applications in the cosmetics industry. Based on data of the Geneva-based International Trade Center, there is a steady decline in the market for fresh and dried coconut. However, the demand for coconut oil and coconut coir is improving despite difficulty of entering of global markets by developing countries, which produce coconut.

Coconut coir is mainly used to produce traditional products such as brushes, brooms, ropes and yarns, for local markets of producing countries. These markets have shrunk through time due to the preference of local consumers for the synthetic substitutes of these traditional products. However, the trend in industrialized countries for more environment-friendly products has given rise to growing demands for natural fibers such as the coconut coir. These natural fibers are raw materials for the production of erosion control mats, geotextile and bioengineering industrial products. In general, coconut prices are on the downtrend due to oversupply. Lately, however, slight increase in the prices of coconut products like fibers has reawakened the enthusiasm of coconut producing countries.

The Philippines has an estimated 4.09 million hectares devoted to coconut production. Among its major coconut producing areas are: Cordillera Administrative Region, Ilocos provinces, Cagayan Valley, Central Luzon, Southern Tagalog, Bicol, Western Visayas, Central Visayas, Eastern Visayas, Western Mindanao, Northern Mindanao, Southern Mindanao, Central Mindanao, CARAGA region, and the Autonomous Region in Muslim Mindanao. Coconut accounts for the country’s largest farm export, reaching US0.237 million in 2004. The biggest share is contributed by coconut oil, which amounts to US$ 573.736 million for 952.275 metric tons.

In the Philippines, 90% of total production is devoted to copra and coconut oil, which ironically only utilizes 35% of the whole nut. The rest consisting of the husk, water and shell is mostly underutilized. Furthermore, the Philippine coconut industry is steadily losing ground to other vegetable oils. In 2000, a typical Filipino coconut farmer in a rural community has per capita income way below the poverty line. However, much effort is being undertaken by the Philippine Coconut Authority to increase production in rural areas through varietal improvement, integrated farming system and integrated pest management. More importantly, it has expanded the opportunities for coconut farmers to improve their income through product diversification, product quality and best farming practices, as well as development of new technologies.

Among the products with so much potential for diversification is the coconut husk. Traditionally used as fuel for copra making, this erstwhile coconut waste has the potential as raw material for high-value industrial products. According to the Fiber Industry Development Authority, there are market potentials for coir fiber and its byproducts that are not yet fully tapped. For example, coir possesses unique physical and technical characteristics that are highly desired in the manufacture of new industrial products for construction and engineering, among others. It is also in demand for the fishing industry since it is buoyant, resistant to bacteria and salt water, thus making it suitable as marine cordage and for use in commercial marine culture. Lately the demand for coir and its by-products such as coir dust and peat has been huge in European countries, particularly the Netherlands.

Because of its geographic location, the Philippines has an advantage over other coconut growing countries in the region. It is closer to the traditional markets for coconut products, such as Japan, Korea, Taiwan and Australia. But the bigger market is still Western Europe with an annual coir fiber demand of 28,000 metric tons and 26,000 metric tons of coir yarn and rope, respectively. Much of the supply comes from Sri Lanka and India. Currently, about 4 million doormats and 150,000 square meters of coir floor coverings are needed in Germany, the Netherlands and the United Kingdom. Closer to home, there is a potential coir fiber demand of 7,000 metric tons and 700 metric tons from Japan and South Korea, respectively. The bedding industry of South Korea alone needs a supply of around 1,600 metric tons of sisal annually, which can easily be replaced by coir fiber. On average, its automotive industry needs 16 metric tons of rubberized coir pads and 120 metric tons of twisted yarn. European, Japanese and Korean car manufacturers will have a combined demand for rubberized molded coir of about 137,000 metric tons annually.

The Metal Industry Research and Development Center of the Department of Science and Technology has already developed a coconut coir twining machine to address the need for mechanization of the coconut coir production by small producers. In collaboration with the Coco Coir Industry Association of the Philippines, the agency has come up with a quality that meets world standards. The machine produces two to three kilograms per hour of 2-ply ropes with diameters ranging from 4-5 millimeters. The twined coir can be used for the manufacture of doormats, wall carpets, sandbags for riverbanks and erosion control, as well as industrial and household items. Much of the application of coco coir in developed countries is in rehabilitation of dried areas, football fields, golf course greens and even riverbanks, slopes and ridges susceptible to soil erosion.

Another agency of the Department of Science and Technology that is making a breakthrough in industrial application of coco coir is the Forest Products Research and Development Institute (FPRDI). In collaboration with Dutch agencies, it developed a coconut fiberboard of unique strength and aesthetic quality. This fiberboard does not use any synthetic binder, thus making it less expensive than similar commercially available products in the market. The presence of lignin in the coconut coir, which serves as a natural binder, when subjected to high temperature and pressure, produces the fiberboard that displays desirable strength and finish suitable for home construction and home furnishing. The lignin eliminates the need for expensive and hazardous synthetic binders such as urea formaldehyde, thus the product can be said to be environment-friendly and safe for humans.

According to the PCA, the sole agency tasked to develop the coconut industry; there is a multimillion-dollar potential for coconut exports to China. Being eyed are geotextiles, coco coir and peat, as well as coco charcoal. PCA also cited that China is interested in powdered coconut milk, which is a regular ingredient in Chinese cuisine. The huge demand for sport drink in the Olympic Games to be held in China in 2008 is anticipated and this can be easily filled by coconut water processed as sport drink. The patent for the process is owned by the Food and Agriculture Organization of the United Nations, but can be adopted by would be sport drink manufacturers.

Another eye-popping market need in China is coco coir for soil erosion control. Dr. Justino Arboleda of Juboken Enterprises has developed a new technology for the production of coco coir net for soil erosion control. The coconet is being marketed to Japan, China, Europe, Germany, and the United States. The company produces at least 30,000 square meters of coconet each month. The coconet is six times more durable than jute, thus it is more desirable for soil erosion control. Juboken also manufactures mats for making car seats and mattresses as well as coconut dust as soil conditioner. For his pioneering breakthrough in industrial and commercial application of coconut coir and byproducts, Dr. Arboleda recently received the Golden Shell Award from Philippine President Gloria Macapagal-Arroyo.

As mentioned earlier, coconut oil accounts for the largest share in the Philippines’ coconut exports. Like shining from shook foil, so to speak, coconut oil has captured the imagination of both domestic market and export market for its new process of producing virgin coconut oil. Unlike the traditional way of producing coconut oil, this time the process is without application of heat. The cold process produces the virgin coconut oil, which has now a wide local following among Filipinos, it being a food supplement with curative properties. Though not backed by empirical findings from the Bureau of Food and Drugs Administration, the virgin coconut oil has been claimed to improve the immune system of the human body. Some anecdotal evidences by users claim that the coconut virgin oil is good for control of hypertension, diabetes, high uric acid and, lately, HIV/AIDS, among others.

A more industrial application for coconut oil is in the production of engine additives, which facilitate cleaner and more efficient burning of diesel fuels. These additives which are commercially manufactured in the Philippines also possess cleansing properties which further enhance performance and life of regular car engines. The quality of this additive meets the high standard of foreign markets. Thus, a Filipino manufacturer recently clinched contracts with Japanese companies for the supply of biodiesel. Locally, petroleum companies have also ventured into selling the additive under their respective corporate brands and labels.

Despite the awesome potentials and pioneering breakthroughs in technology applications with the coconut products, the Philippine coconut industry is still overwhelmed by problems that run through the full spectrum of industry development, from producer to consumer. First, the country’s 4.09 million hectares of coconut plantation could use an integrated approach to realizing the full economic potentials of coconut. Small coconut farmers still have problems in transporting their coconuts from their farms to the nearest harbor. They still have limited access to processing equipment or an integrated processing plant near their communities. There is a further need to increase knowledge in sustainable and efficient production technology. More importantly, there is need to access new markets.

Starting a coconut plantation places a heavy demand on land use and biodiversity since it requires large tracts of land planted only to a major crop, with inter-crops for additional cash to farmers. New farming systems encouraged such by integrating other crops and livestock with coconut to increase bio-diversity and land productivity. This new approach to land productivity also promotes the use of farm waste as raw materials for new products. Large amount of coconut husk and fiber are used to be waste materials, which are left to rot or burned for disposal. But learning from the experience of developed economies such waste is now pointing the way to the new future of coconut. Waste can be used to produce energy for village consumption. This could address the cash flow of most seasonal coconut farmers.

Among the difficulties experienced by coconut farmers in terms of trade is the lack of knowledge of markets, standards and compliance requirements, quality benchmarks, foreign distribution channels, foreign contacts and business partners, among others. There is also limited access to funding sources, which usually dampens the enthusiasm of coconut farmers to rise above the challenge for self-reliance.

Like what it is referred to as “tree of abundance”, the coconut is seen as the tree of new economic possibilities for millions of coconut farmers once all the new developments in technology, product streams, market niches are pulled in one direction. The Philippines, with one-third of its population residing in coconut growing regions, will stand to benefit from the new surge of life being infused into the coconut industry. By the industrialization of the coconut industry right at the countryside, the country can achieve the goals of its centerpiece program of reducing poverty, thereby putting the country on the stage of economic comeback and sustainable growth and development.