20 February 2012
An expanding livestock sector, rapidly growing economy and an appreciating currency drove demand for SBM to approximately 1.7 million tons in 2011, and 2012 levels will likely reach 1.9 million tons. However, when SBM prices spike, some farmers use a combination of copra meal and vitamins as a substitute. Copra meal production surged in 2010 to 920,000 tons due to record level copra output. It then fell to 770,000 tons in 2011, and is expected to remain at this level in 2012, as coconut palms take a 'biological rest' after three consecutive years of heavy nut-bearing. Accordingly, CNO production and exports declined to roughly 1.47 and 0.9 million tons, respectively, in 2011, and will likely remain at this level in 2012.
Philippine coconut production set a new record in 2010 but then declined by almost 20 percent to 2.3 million tons in 2011 and is expected to remain at this level in 2012 as coconut palms take a 'biological rest' after three (3) consecutive years of heavy nut-bearing from 2008 to 2010. As a result, copra imports increased by 32 percent up to 100,000 tons in 2011, and will remain at this level in 2012. Philippine soybean production is insignificant and the small amount of imports is purchased by one (1) crusher.
Increasing feed demand by the expanding domestic livestock, dairy, poultry and aquaculture industries, and the strengthening Philippine Peso are expected to result in higher SBM imports through 2012. US SBM exports to the Philippines, which surpassed 620,000 tons in 2011, are estimated to reach 700,000 tons in 2012. Historically high SBM prices, however, may cause some operations to shift away from SBM to copra meal and vitamis, according to industry sources. Copra meal exports are expected to decline in 2011 and stay at this level in 2012 reflecting the forecasted decline in copra output.
Local soybean oil (SBO) production and trade are insignificant due to the local preference for CNO and palm oil. Coconut oil (CNO) is the dominant edible oil consumed. According to industry sources, edible oil prices started to increase the second semester of 2010 due to increased demand by China and India. CNO and palm kernel oil prices, in particular, increased more steeply on the news that local copra production would decline in 2011. Additional price pressure came from increasing demand from the biofuel industry. Coconut methyl ester (CME) derived from CNO is the biodiesel source used in the Philippines. CNO exports in 2011 declined dramatically (35 %) due to reduced copra production and increasing local demand. Exports in 2012 are expected to remain at 2011 levels as no dramatic change in copra output and crush is expected.
Coconut (copra) is the only significant oilseed produced in the Philippines. Despite the El Nino weather disturbance in early 2010, copra production during the same year reached record-levels, according to industry estimates. 2010 was the 3rd consecutive year of very good copra output and coconut production in 2010 was raised as a result. Statistics on "area planted", "area harvested" and "number of coconut trees" through 2012 were adjusted higher due to strong prices and aggressive replanting efforts by the Philippine Department of Agriculture (DA).
Copra production in 2011 declined to 2.3 million tons from the previous year?s level of 2.8 million tons as effects of the El Nino drought were more pronounced. In addition, coconut palms are likely now taking a „biological rest? period to recover from the stress brought about by three successive years of heavy nut-bearing, according to industry experts. Hence, downward adjustments were made to production statistics in 2011 for a considerable decline to 2.3 million tons. This reduced level of production is expected to continue in 2012.
Soybean production is expected to remain insignificant. Aware of its important role in the feed and food industry, the Philippine DA is studying the feasibility of commercial soybean production in the Philippines (refer to OILSEEDS, Policy).
Copra is the dried white flesh of the coconut that is then crushed to extract CNO. Copra meal and glycerin are by-products in the CNO extraction process. Copra crush in the Philippines mirrors local coconut production. Copra crush in MY2009/10 (2010) was considerably raised due to unexpectedly high copra production. Spoilage losses of copra occurred in 2010 as a result of heavy flooding in the main island of Luzon. Consumption in the form of spoilage is expected through 2012 to account for climate change-related losses.
Despite record production in 2010, copra prices were very volatile in 2010 and 2011. Annual average local copra prices were at P29.88 ($0.69) per kilo in 2010, and increased 61 percent to an average annual price of P48.03 ($1.11) per kilo in 2011. Copra prices in 2011 peaked in April at P60.51 ($1.40) per kilo.
Copra crush in 2012 is forecast to remain at the depressed 2011 level of 2.4 million tons as a result of the drop in coconut production. No significant change in copra consumption is expected in 2012.
There currently is only one soybean crusher in the country that imports a small amount of soybeans each year. The small amount of locally-grown soybeans is mainly used for food purposes. There is a small but growing feed demand for whole beans (full-fat soya) from the US that the trade expects will continue through at least 2012.
Following are copra import statistics for 2008-2010 based on Global Trade Atlas (GTA) data. Copra imports in 2010 in the PSD Table were adjusted accordingly. Papua New Guinea remains the dominant source of Philippine copra imports.
Philippines Import Statistics
Commodity: 1203, Copra
Annual Series: 2008 - 2010
|Papua New Guinea||T||35269||34702||30003|
|Source: Global Trade Atlas/Philippine Customs Statistics|
Copra exports are expected to remain insignificant through 2012.
Soybean imports for 2008-2010 are insignificant and provided in the following table. Imports for 2010 in the PSD Table were adjusted based on the GTA data. Bean imports from the US dominated the market with a 39 percent share. Beans from China, while very small in 2009, increased significantly in 2010. The increase in soybean imports from Singapore and Vietnam in 2010 is likely the result of the duty-free import privilege provided under the ASEAN Free Trade Agreement (see Oilseeds, POLICY).
Philippines Import Statistics
Commodity: Soybeans, Group 57 (2007)
Annual Series: 2008 - 2010
|Source: Global Trade Atlas/Philippine Customs Statistics|
Overall soybean imports in 2011 declined from the previous year's level due to high global bean prices, according to trade contacts. Imports may increase in 2012 as prices stabilize and demand recovers. Imports in 2012, however, are expected to be less than the 2010 level.
As in most years, there were no Philippine soybean exports in 2010 and 2011.
Oilseed inventories are basically on-farm and/or private stocks. Copra stocks declined marginally in 2011, and are expected to decline slightly further in 2012 due to the expected reduction in copra output.
Soybean stocks are expected to decrease through 2012 due to weak demand.
The DA has announced a soybean development program for the period 2010-2014, i.e., "Building Sustainable Soybean Industry in the Philippines" although it is still in its early stages. The DA conducted seed-testing in 2011 for possible distribution to farmers. Post continues to monitor events along this line but believes commercial soybean propagation will be difficult to achieve in the near future (1-3 years) given cultural and extension constraints.
As mentioned in the previous annual report, the current MFN duties were set to expire by end-2010. Pending the approval and issuance of an updated tariff structure for the period 2011-2015, however, the following 2008-2010 duties are carried over and still apply.
Copra imports (HS Code 12.03) have a 10 percent tariff while soybeans (HS Code 12.01) carry a one (1) percent duty under the Most Favored Nation (MFN) tariff scheme for the period 2008-2010. Copra and soybean imports originating from other ASEAN countries are duty-free (starting January 1, 2010) under the Common Effective Preferential Tariff CEPT scheme for the AFTA. The lower CEPT duties of the AFTA were implemented by Executive Order no. 850 signed by then President Gloria Macapagal-Arroyo on December 2009. [For Production, Supply and Demand Data Statistics, please download the document]
Upward adjustments were made to copra meal production in 2010 as a result of increased copra production and crush. Copra meal output in 2011 was pared down, and its decline from the previous year?s level was steeper than expected due to the significant drop in copra output and crush. Copra meal production in 2012 will likely stay at 2011 levels as coconut palms continue their biological „rest? period.
Though bean imports nearly doubled in 2010, with just one local soybean crush facility, local SBM production remains insignificant. SBM production declined in 2011 due to increasing production costs, but is forecast to rebound slightly in 2012 as overall prices stabilize.
Philippine economic growth in 2010 reached 7.3 percent, far exceeding the official 5-6 percent target for the period, and the highest growth rate in more than 30 years. Average inflation was 3.8 percent, well within the Philippine Government?s (GPH) target of 3.5-5.5 percent and slightly higher than the 3.2 percent average inflation in 2009. GPH economic planners had initially hoped to sustain GDP expansion at 7-8 percent through 2016 via investments under the government?s private–public partnership program, but subsequently reduced the target to 4.5 to 5.5 percent this year due to the deteriorating global economy.
For 2011, Philippine GDP slowed to 3.7 percent in 2011, below the revised 4.5 to 5.5 percent GPH forecast, according to the National Statistical Coordination Board. Agriculture, fisheries and forestry expanded by 2.6 percent in 2011, up from the 0.2 percent contraction in 2010. Industry grew by 1.9 percent in 2011 from 11.6 percent in 2010 while the services sector expanded by 5 percent from the 7.2 percent growth in 2010. The slowdown in 2011 was attributed by economists to under spending by the GPH in infrastructure, the weak performance of the farm sector, and the crisis in the US and Europe which affected export performance. Government expenditure shrank by 0.7 percent while exports declined by 3.8 percent in 2011. For 2012, GPH economists project GDP growth to accelerate to 5-6 percent.
Inflation in 2011 averaged at 4.8 percent, well within the government?s target range of between 3 and 5 percent for the full year, according to the National Economic and Development Authority. Private analysts see Philippine inflation improving to a 4 percent average for 2012.
The GPH reported the Philippine population was 95 million in 2010 and that it is expanding by an estimated two (2) million people annually. Economists estimate food accounts for a considerable share of the local price basket, and that rice accounts for 20-25 percent of overall food expenditures for lower income consumers. According to the National Statistical Coordinating Board, roughly a third of the population is "poor" or "not able to afford basic food and non-food needs". This has forced the GPH to implement a food-program targeting the poor (refer to MEALS, Policy).
At the same time there is a growing middle and upper class whose primary focus is on quality. Eating out for this market segment is gaining popularity as indicated by the flourishing food retail industry. Analysts estimate that as incomes continue to rise, the millions of Filipinos in this category are likely to consume less grain and more protein.
The positive economic prospects coupled with the food demand (particularly for protein sources) of the rapidly growing population bode well for increased animal feed demand through 2012. Feed demand would have been higher had it not been for increasing prices of feed ingredients and overall production costs, according to industry contacts. The same source reports that some small backyard hog farmers are having a hard time operating as a result of increasing production costs. The domestic hog-raising industry account for an estimated 65 percent of the country's feed requirements, followed by poultry with 25 percent and the balance divided by the local fishery sector and other animal farms.
In 2010, livestock production increased 1.5 percent with the hog sector posting a 1.1 percent gain. During the same period, poultry output was up by 3.7 percent, while production increased 2.7 percent in aquaculture compared to the 2009 level. For 2011, hog and poultry production were 2.2 and 4.3 percent higher, respectively, compared to the previous year?s level. Aquaculture gained 2.4 percent in 2011. Growth of the overall farm sector in 2011 was 2.3 percent, up from the 0.3 percent contraction in 2010.
Copra meal is mainly used as a binder in animal feed rations, and is not a protein substitute of SBM. It is, however, cheaper and is mixed with other ingredients. Small backyard livestock and poultry raisers likely utilized more copra meal and partially shifted away from SBM use in 2011 as a result of increasing prices of feed ingredients. The increase in copra meal consumption through 2012, however, will likely be more due to wastage as a result of calamity-related losses.
For SBM, demand is expected to continue growing through 2012 although downward revisions were made to consumption estimates during the period. SBM feed demand was modestly reduced in 2010 and 2011 due to high bean prices and the slowing economy. While some small backyard raisers are reportedly struggling with high feed prices, large commercial farms are benefiting from firm meat demand. These farms are not likely to shift away from SBM use, convinced of its superiority as an animal feed protein-source. In addition, the 2011 declaration by the Office International des Epizooties (OIE) that the Philippines is free from Foot-and-Mouth Disease (FMD) is expected to enhance higher feed demand by these commercial farms. SBM consumption will likely surge in 2012 as a result of increasing feed demand.
Rising feed costs makes increased sales of distillers dried grains (DDGS) and other cheaper feed alternatives attractive. DDGS use in animal feeds has been increasing modestly in recent years.
There were no copra meal imports on record in 2011 and no imports are predicted in 2012.
Following are copra meal exports through 2010 based on GTA data. Noteworthy is the near ten-fold increase in copra meal exports to China. [For Philippines Export Statistics, please download the document]
Industry predicted copra meal exports in 2011 to decline by roughly 40 percent from the previous year's level. Post predicted the decrease to be even greater (53 percent) on an October to September basis in 2011. Copra meal exports in 2012 are expected to stay at the 2011 level as a result of flat copra crush during the year.
SBM imports for 2008-2011 are provided in the following table, and are based on GTA exporter data. SBM exports in 2010 were insignificant, and are expected to remain as such through 2012.
Reporting Countries Export Statistics (Partner Country: Philippines)
UDG: Soybean Meal, Group 43 (2007)
Annual Series: 2008 - 2010
|Source: Global Trade Atlas/Exporter Statistics|
Despite high global SBM prices, imports are expected to increase through 2012 as a result of continued strong local meat demand, coupled with meat-export opportunities as a result of the FMD-free status declaration by the OIE. Aggressive SBM buying is expected to be enhanced by the renewed strength of the Philippine Peso. According to data from the Bangko Sentral ng Pilipinas, the Peso closed at P43.89/US$ in end-December 2010 compared to P46.36 during the same period in 2009. It is currently in the vicinity of P43 to the US$ and is expected to strengthen further in 2012. SBM imports in 2012 are likely to surge as raisers capitalize on the FMD-free announcement and explore meat export opportunities in the region.
Philippine oilmeal inventories are held by the private sector. Copra meal stocks were raised in 2010 due to higher copra crush, but are expected to decrease through 2012 as a result of the expected decline in copra output and copra meal production.
SBM stocks, on the other hand are expected to strengthen through 2012 as local demand for animal feed is expected to increase in view of the growing population, the improving economy, as well as the opportunity to export meat. Local feed millers are likely to strengthen SBM stocks due to strong feed demand from raisers through 2012.
Copra meal imports (HS Code 2306.50.00) are levied a 10 percent MFN import tariff but may be brought in duty-free under the CEPT scheme of the AFTA. Imports of SBM (HS Code 23.04), on the other hand, are levied a three (3) percent MFN rate and are also duty-free under the CEPT scheme.
To offset the negative impact of recent food price increases on the poor, the GPH, through the Department of Social Welfare and Development, implemented in 2011 a P21 billion ($477 million) conditional cash transfer (CCT) program similar to the programs implemented in some Latin American countries. In general terms, the transfer of cash to the poor require beneficiaries to make investments in areas such as education. Since 2008, under the previous Arroyo government, less than a million families received CCT incentives. The current Aquino Administration is aiming for 2.3 million beneficiaries/families and distributing cash to the poor is likely to increase their food purchases. [For Production, Supply and Demand Data Statistics, please download the document]
CNO production in 2010 was raised consistent with upward revisions made to copra output and crush, but was pared down in 2011 due to reduced copra production. No dramatic change in CNO production is expected in 2012, reflecting the expected copra output in 2012.
Philippine SBO production is insignificant relative to overall Philippine vegetable oil production and is supported mainly by imported beans. SBO output in 2011 was reduced to reflect more realistic crush extraction rates and will likely decline from the previous year?s level. SBO production will likely recover and increase in 2012 as prices stabilize and demand picks up.
Like copra prices, local CNO prices were very volatile in 2010. From P33.81 ($0.78) per kilo in January 2010, CNO prices more than doubled reaching P71.52 ($1.65) per kilo by December, according to industry reports. The average CNO price for 2010 was P48.37 ($1.12) per kilo. Prices continued to increase in 2011 peaking at P98.71 ($2.27) per kilo in February before settling at P69.29 ($1.60) per kilo by December. The average CNO price for 2011 was P78.25 ($1.80) per kilo, or 62 percent higher than the previous year?s average price.
Trade sources attribute the increase in global edible oil prices to the surge in demand from India and China. The same source, according to press reports, also considers increasing fuel oil prices to be a factor as CNO is the preferred local biodiesel feedstock.
CNO is also the raw material for oleochemicals used in the manufacture of soaps, detergents, cosmetics, shampoos and other toiletries. CME is an oleochemical and is the local biodiesel feedstock used. The conversion of CNO to CME is roughly 1:1 and an estimated 140,000 MT of CNO is needed to satisfy the 2-percent mandated biodiesel blend (refer to OILS, Policy).
All segments of CNO domestic consumption (food, feed and industrial use) were pared down in 2011 due to high edible oil prices, but are still expected to increase from the previous year's levels. No significant change is expected in CNO demand in 2012 as supply tightens as a result of the decline in copra output.
SBO, on the other hand, is mainly used for mayonnaise and salad dressings, and the local industry does not consider it to be a complete CNO-substitute. SBO food use and industrial demand are expected to marginally decline in 2011 as a result of increasing commodity and fuel prices. Demand is expected to recover and increase in 2012 as prices stabilize.
CNO exports for the period 2008-2010 follow. Exports in 2010 rose a dramatic 62 percent from the 2009 level, enhanced by increasing CNO prices. CNO exports to China almost quadrupled in 2010. The majority of CNO exports were shipped and delivered in the first half of 2010 according to industry. [For Philippines Export Statistics, please download the document]
On a market year basis (October to September), 2011 trade data from the GTA shows exports to be lower (897,000 MT). No significant change in CNO exports from the previous year are expected in 2012, reflecting flat copra production.
Following are SBO imports for 2008-2010 based on GTA data. The majority of imports in 2010 originated from Malaysia and Singapore. No significant change in SBO imports is expected through 2012 due to feeble demand as the Philippine economy slows down.
There were likely no SBO exports in 2010, and none expected through 2012.
Philippines Import Statistics
Commodity: Soybean Oil, Group 42 (2007)
Annual Series: 2008 - 2010
|Source: Global Trade Atlas/ Philippine Customs Statistics|
Like Philippine oilseed and oilmeal stocks, CNO inventories are private sector held. CNO ending stocks increased in 2010 due to higher copra supply and increased crush, but are expected to decrease through 2012 due to the decline in copra production.
SBO stocks, also held by the private sector, were also expected to marginally decline in 2011 due to reduced production but increase slightly in 2012.
The Philippine Biofuels Act of 2006 mandates local diesel fuel to have a one percent biodiesel content sourced from local agricultural products. From an initial 1 percent blend starting 2007, the mandate was doubled to 2 percent in early 2009. There have been no major issues in complying with the mandated biodiesel blends and there have been proposals to increase the blend to five (5) percent. While a final decision has not yet been reached, demand for CNO for biodiesel production has increased.
CNO imports (HS Code 15.13) are levied a 10 percent MFN import tariff but may be brought in duty-free under the CEPT scheme. Crude CNO (HS Code 1513 11.00), however is subject to a 3 percent CEPT tariff. Imports of SBO, (HS Code 15.07) on the other hand, are subject to a seven percent (7) MFN tariff but may be imported free of duty under the CEPT scheme. [For Production, Supply and Demand Data Statistics, please download the document]
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