2009

SNAPSHOT FIRM LEVEL VALUE

CHAIN ANALYSIS AND MARKET
ASSESSMENT REPORT:
COCONUT (COPRA, FIBER AND
VIRGIN COCONUT OIL)
Caraga Region

Strengthening of the Agro-Industrial

Sector in Bicol and Caraga (SAIS-BC)

Report prepared by:

SDCAsia in partnership with Fundacion CODESPA

TABLE OF CONTENTS
TITLE
Section 1: Overview of the Coconut Industry
A.
World Production
B.
Philippine Production
C.
Caraga Coconut Production
D.
Industry Players
E.
Relationships / Inter Firm Cooperation
Section 2 : Market Assessment
A.
Market Trends
B.
Implications to Cooperation upgrading Directions
Section 3 : Firm Level Value Chain Analysis
A.
Copra
B.
Coco Coir / Fiber Processing
C.
Virgin Coconut Oil

Page No.
4
4
5
7
15
18
26
27
31
34

ACRONYMS
ARMM
AusAid
BAS
BFAD
CARP
CDM
CER
CLACOFAMCO
DA
DCM
DENR
DPWH
GVA
KAAGAPMUCO
LGU
MGB
MOA
MT
PCA
PCFMPC
SAIS BC
SOEMCO
TAGINDECO
UCAP
VCO
WESCOPROMACO

Autonomous Region of Muslim Mindanao

Australian Aid
Bureau of Agricultural Statistics
Bureau of Food and Drugs
Comprehensive Agrarian Reform Program
Clean Development Mechanism
Certified Emission Reductions
Claver Coconut Farmers Cooperative
Department of Agriculture
Direct Copra Manufacturing
Department of Environment and Natural Resources
Department of Public Works and Highways
Gross Value Added
Kaagap Multi-Purpose Cooperative
Local Government Unit
Mines and Geo-Science Bureau
Memorandum of Agreement
Metric Ton
Philippine Coconut Authority
Paco Coconut Farmers Multi-Purpose Cooperative
Strengthening of the Agro-Industrial Sectors in Bicol and Caraga
Socorro Empowered Peoples Cooperative
Tago Agro Industrial Development Cooperative
United Coconut Association of the Philippines
Virgin Coconut Oil
Western Coconut Producers Marketing Cooperation

Section 1:
OVERVIEW OF THE COCONUT INDUSTRY
This snapshot report will focus only on the existing products of copra and whole nuts that are
commonly traded within and outside Caraga, as well as the other products introduced and supported
by the SAIS BC project namely: coco coir fiber and pith from the husks and virgin coconut oil.

A. WORLD PRODUCTION

Coconut tree is ranked among one of the 10 most useful trees of the world and is often called as
the tree of life. It is harvested in more than 93 countries in the world from an area of 10.685
million hectares, with an annual production of 54.254 million MT of nuts or 13.59 million MT of
copra equivalent.

Prior to 1996, Philippines topped world production of coconuts. Based on the 2008 FAO Agri
statistics, the Philippines ranks first as the country with the largest area planted to coconut with
3.37 million hectares. However, Indonesia is the largest coconut producing country, and annual
production of 19.5 million MT planted in an area of 2.9 million hectares. Indonesia is followed by
the Philippines with an annual production of 15.3 million MT. India, with 1.9 million hectares and
annual production of 10.89 million MT, occupies third place.

In terms of yield, Philippines ranks 6th (4.53 MT/hectare) two places down from being the 4th in
2005. Vietnam has the highest yield per hectare at 7.85 MT, followed by Thailand at 6.73
MT/hectare, and Indonesia at 6.61 MT/hectare.
Major Coconut-Producing Areas in the World: Production and Yield
Country

Philippines
Indonesia
India
Sri Lanka
Thailand
Malaysia
Vietnam
World

Areas Harvested
In hectares
% of
World

3,379,740
2,950,000
1,940,000
394,840
255,697
174,000
138,300
11,208,072

30.15%
26.32%
17.31%
3.52%
2.28%
1.55%
1.23%

Nut Production
In MT
% of
World

15,319,500
19,500,000
10,894,000
2,200,000
1,721,640
555,120
1,086,000
61,094,243

25.08%
31.92%
17.83%
3.60%
2.82%
0.91%
1.78%

Yield
In MT/ha
Rank
4.53

6.61

5.62

5.57

6.73

3.19

7.85

5.45

Source of Data: FAO Statistics 2008

B. PHILIPPINE PRODUCTION
In 2008 (BAS), there are around 339.357 Million bearing trees with a production volume of 15.319
Million metric tons with a value of 80,121 million pesos at 2008 prices. Within the country, 68 out of
the 79 provinces are identified as coconut areas. In general, 26% of the total crop lands in the country
are planted to coconut with rice as the number one crop based on the percentage land used.

The Philippine coconut industry contributes at an annual average of 5.67% to the total gross value
added (GVA) in agriculture (this was approximately 10% in the 1970s) and 1.14% to the countrys
gross national product. Annually, the country exports at an average of USD 800 million worth of
products which is roughly 40 billion pesos. The country contributes an estimated 59% of the total
world exports in coconut. In addition, there are approximately 3.5 million farmers and farm workers
dependent on the coconut industry with approximately a total of 25 million Filipinos directly and
indirectly involved in the industry.

C. CARAGA COCONUT PRODUCTION

The CARAGA Administrative Region ranked 8th in terms of volume of coconut production in the
country based on 2008 Bureau of Agricultural Statistics (BAS) with 1,011,096.28 nuts which is 6.6%
of the countrys production. The Davao Region is the top producer contributing to about 17.44% to
the countrys coconut production followed by Region 8, 9, 10, 4-A, ARMM and Region 5
respectively. Among the 4 provinces within the region, Surigao del Sur is the top producer
contributing to about 45.41% of the regions coconut production or 459,134 nuts in 2008. The second
top coconut producing province in the region is Surigao del Norte with 34.01%, followed by Agusan
del Norte with 16.30% and Agusan del Sur with 4.28% respectively.
For the last 5 years, coconut production in
Caraga has steadily increased by 6% from
955,000 in 2004 to 1 million in 2008.
Agusan del Norte was noted to have the
highest increase of 16% (2008/2004) in
production compared to the other
provinces. Even though Surigao del Sur
had the highest volume of production, from
2004 to 2008, there was only a 1% increase
in production. The growth of Agusan del
Norte coincides with the increasing trend in
the number of bearing trees for the last 5
years. Surigao del Norte recorded to have a decrease in the number of bearing trees from 10,263,000
in 2004 to 9,910,000 in 2008. This may be due to the incidence of tree senility (old trees), where they
are cut down and converted to coconut lumber.

Number of Bearing trees Per Province from 2004 - 2008

2004
2005
Philippines
331,465,540 328,652,399
CARAGA Administrative Region
20,374,800
20,010,800
Agusan del Norte
2,161,000
2,161,000
Agusan del Sur
1,455,000
1,454,000
Surigao del Norte
10,263,000
9,900,000
Surigao del Sur
6,495,800
6,495,800

2006
335,466,568
20,035,156
2,165,000
1,474,356
9,900,000
6,495,800

2007
338,724,352
20,839,900
2,700,000
1,500,000
9,910,000
6,729,900

2008
339,357,206
20,845,650
2,700,000
1,505,750
9,910,000
6,729,900

Change
2%
2%
25%
3%
-3%
4%

Yield per hectare per province from 2004-2008

2004
Philippines
4.41
CARAGA Administrative Region
4.30
Agusan del Norte
5.36
Agusan del Sur
3.26
Surigao del Norte
3.44
Surigao del Sur
5.04

2005

2006
4.57
4.45
5.28
3.26
3.76
5.06

2007
4.48
4.55
5.58
3.34
3.90
5.05

2008
4.42
4.61
6.06
3.44
3.89
5.08

4.53
4.61
6.17
3.45
3.82
5.11

Change
3%
7%
15%
6%
11%
1%

In terms of yield, the region has a slightly higher productivity compared to the national average of
4.53 metric tons/hectare in 2008. Overall, there was an increasing yield in coconut for the whole
region from 2004 to 2008. Agusan del Norte (6.17 MT/ha) and Surigao del Sur (5.11MT/ha) had the
highest yield in coconut production per hectare. Increasing productivity in the region would translate
to increasing the supply of coconuts and its by-products.

In terms of nut productivity per tree, Caraga has higher average number of nuts per tree (49 nuts)
compared to the national average of 45 nuts per tree. Region 3- Central Luzon has the highest nut
productivity per tree at 80 and followed by Southern Mindanao.
Nut Productivity per Tree: Caraga vis--vis Top 3 Regions
Region
2006
Central Luzon
78
Southern Mindanao
64
Socsksargen
59
Caraga
50
Philippines
45

2007
77
65
59
48
44

2008
80
67
60
49
45

Source: UCAP Coconut Statistics 2008

D. INDUSTRY PLAYERS
1. Farmers/Farmer Cooperatives
The Philippine Coconut Authority (PCA) defines a coconut farmer as:
-

Owner-farmer: who owns and tills the farm by himself and/or with assistance of farm laborers
and/or by tenants
Farmer-tenants: tills, harvests, and processes the coconut product and is compensated in the
form of the produce which he sells as his/her own
Farm workers: work in the coconut farm for wages or in-kind compensation.

It is estimated that in Caraga there are more than 100,000 coconut farmers and farm workers.
Majority of the coconut farms are smallholdings of less than 5 hectares. The shrinkage of the average
farm size is attributed in part to the Comprehensive Agrarian Reform Program (CARP) which started
in 1988.
The farmers are considered among the poorest with an average annual income ranging from PhP
13,000 16,000 per hectare. Farmers either sell whole nuts or in copra form. Main income from
coconut is derived from copra which is then taken to oil mills through a complex marketing system
composed of multi-layered intermediaries.
During the recent years, there is an increasing number of farmers who engage in value added
processing with the assistance or via their cooperatives to augment their income. For the past two
years, SAIS-BC is supporting the development of the coco coir enterprises of the following 6
cooperatives:
COOPERATIVE
Bislig City Producer MPC

LOCATION
Bislig City, Surigao del Sur

Claver Coconut Farmers MPC (CLACOFAMCO)

Claver, Surigao del Norte

Socorro Empowered Peoples' Cooperative (SOEMCO)

Tago Agro-Industrial Development Coopeartive
(TAGINDECO)
Western Coconut Producers Marketing Cooperative
(WESCOPROMACO)
Kaagap Multi-Purpose cooperative (KAAGAPMUCO)

Socorro, Surigao del Norte

Tago, Surigao del Sur
Malimono, Surigao del Norte
San Francisco, Agusan del Sur

Of the 6 cooperatives being assisted by the SAIS-BC project, three (Tagindeco, Wescopromaco and
Kaagamuco) were already engaged in copra trading prior to project assistance. Clacofamco was
formed in 2007 from a federation of barangay based small coconut farmers. The Cooperative has
recently started their coco fiber processing operation last October of 2009. Soemco was initially
formed by 17 LGU employees of the Socorro Municipality. The current activities of the cooperative
include buy and sell, lending, management and operation of the Socorro Municipality Hotel and
Water distribution system. The Bislig Producers Cooperative of 17 business men and farmers in
Bislig City is currently engaged in trading of baled coco fiber and whole nuts processing and trading.
Wescopromaco has been engaged in Direct Copra Marketing with Granexport and has experienced
highs and lows due to price fluctuations and loan repayments. Tagindecos experiences in collective
marketing are mainly centered on palay and corn trading business. The cooperative is also known for
its coco gin, which they sell locally within the Municipality. Kaagapmuco has had support in the
processing of virgin coconut oil and is currently producing and selling intermittently their oil within

the province of Agusan del Sur. Of the 6 cooperatives, only 2 have started the operations of their new
processing facilities for coco coir fiber processing.
In general, these cooperatives are the main sources of technical and market information to the
members. They also provide support services such as short term financing, value added processing for
those who are operating and doing collective trading of agricultural products.
Aside from the SAIS BC supported coconut cooperatives, another cooperative was reported to have
been granted a set of equipment for coco fiber processing. The Paco Coconut Farmers Multi-Purpose
Cooperative (PCFMPC) in Barangay Paco, Mainit, Surigao del Norte was supported by PACAP
(AusAid) in the set-up of a coco fiber processing facility with the equipment coming from Rigwell
Industries through the assistance of the PCA in the Region. However, during the snap shot study, no
other data can be secured whether the cooperative is still in operation or not.
2. Input Suppliers
Coconut seedlings: Coconut seedlings are gathered from their own produce where the farmer leaves
some nuts and wait for them to mature before planting in their proposed expansion areas. The PCA
intermittently distributes coconut seedlings to farmers thru the cooperatives, but these are highly
dependent on budget resources of the agency.
Fertilizers: Fertilizers are sourced from agricultural supply / general merchandise stores in the
Municipal Centers.
Processing Equipment: The decorticating machines of the cooperatives were all sourced from the
same fabricator. There are varied customer satisfaction feedback from the cooperatives who were
provided with the equipment. Some were satisfied with the
performance of the machine but a greater majority were
dissatisfied with the results of the dry run for the
equipment. Common observation was that the equipment
CELEBES OIL MILL/REFINERY
was not functioning as expected/as per specifications and
Butuan City
the supplier had poor after sales customer service.
3. Coconut Industrial Sector in the Philippines
The coconut industrial sector encompasses wide range of
activities. In general though, they are underutilized due to
lack of supply brought about by declining productivity and
stagnation of the farm sector.
a) Coconut Oil Mills
There are 63 coconut oil mills in the Philippines with total
annual crushing capacity at 4,501,500 MT (copra terms).
25 of the mills are located in Mindanao with aggregate
crushing capacity of 2,503,500 MT. Celebes Oil Mill,
which is the lone oil mill in the region, has annual crushing
capacity of 30,000 MT.
Many of the copra traders sell to the 9 oil mills in Northern
Mindanao which collectively have the highest crushing
capacity in the island at 1,050,000 MT. Two of the biggest
mills in terms of crushing capacity are located in Northern
8

Mindanao, namely: a) Granexport Manufacturing Corporation (Iligan City); and b) Wilmar Edible
Oils Philippines, Inc. (Gingoog City). The oil mills have their buying stations and accredited copra
traders in Caraga.
In general, crushing capacity utilization for Philippine coco oil mills in 2008 was slightly better at
49% than in 2007 which was at 42%. Capacity utilization is directly influenced by available supply of
copra. Oil mills in Southern Mindanao, for instance, have been operating only at 66 percent of its full
capacity due to lack of copra supply.
b) Coconut Oil Refineries
There are 39 coco oil refineries in the Philippines with total annual rated refining capacity of
1,434,750 MT. 15 of the oil refineries are located in Mindanao with collective rated refining capacity
of 653,400 MT. The top 2 refineries in Mindanao in terms of rated refinancing capacity are: i)
International Copra Export Corporation in Davao City; and ii) Wilmar Edible Oils Philippines in
Roxas Dipolog. Celebes Oil Mills, which is the only refinery in the region, has refining capacity of
7,500 MT per year.
Coconut Oil Refineries in Mindanao
As of 30 June 2009
Company
Region IX Western Mindanao
Philippine International Development Corp.
Unicab Industries
Wilmar Edible Oils Philippines, Inc. (Roxas)
Region X Northern Mindanao
Limketkai Manufacturing Corp.
Cagayan de Oro Oil Company
Lanao Milling Corporation
Osamco Manufacturing Corp.
Region XI Southern Mindanao
International Copra Export Corp.
Legaspi Oil Company
Granexport Manufacturing
New Davao Oil Mill
Pacific Oil Farmers, Inc.
Mindanao Coco Development Corp.
Asia Pacific Oil Manufacturing Corp
Region XIII Caraga
Celebes Oil Mills

Annual Rated Refining

Capacity (in MT)
189,000
75,000
9,000
105,000
84,000
30,000
6,000
3,000
45,000
372,900
120,000
90,000
72,000
60,000
14,400
12,000
4,500
7,500
7,500

Source: UCAP Coconut Industry Kit Series of 2008, July 2009

c) Oleochemical Plants
There are 10 oleochemical plants in the Philippines making intermediate coconut-based chemicals
like fatty alcohol, fatty acids, methyl ester, and glycerin. Two of the plants are located in Mindanao,

namely: i) Philippine International Development Incorporated in Zamboanga City; and ii) Pilipinas
Kao, Incorporated in Jasaan Misamis Oriental.
d) Biodiesel Companies
As of May 2009, there are 10 Department of Energy accredited biodiesel manufacturers (coco methyl
ester). Two of the companies are located in Davao City, namely: i) Bioenergy 8 Corporation with 30
million liters capacity/year; and ii) Freyvonne Milling Services with annual capacity of 15.60 million
liters.
e) Dessicated Coconut Plants
There are ten desiccated coconut plants in the Philippines categorized as medium scale mills
employing 50 to 100 people. Aggregate annual production capacity of the 10 plants is 159,609.60
MT. 5 of the 10 companies are located in Mindanao. Franklin Baker Co., with plants in Laguna and
Davao, is the largest producer with a capacity of 32,640 MT per year. In Caraga, Celebes Coconut
Corporation produces desiccated coconuts also for exports and has an annual production capacity of
8,649.60 MT
f) Virgin Coconut Oil Companies
The Virgin Coconut Oil Producers and Traders Association of
the Philippines, Inc. (VCO Philippines) has currently about 84
members, an almost 400% increase from 22 in 2003. Statistics
VIRGIN COCO OIL Celebes
from PCA indicate that as of 2007, there were 218 VCO
producers nationwide and of which 7 are located in Caraga.
There are, however, only about 65 producers with the Bureau of
Food and Drugs (BFAD) registration. The top 10 producers
and exporters of VCO are Luzon based companies. Many of
these companies were already in the herbal medicine and/or
food supplement and coconut business prior to embarking to
VCO production. The top 10 producers and exporters of VCO
are Luzon based companies. Many of these companies were
already in the herbal medicine and/or food supplement business
prior to embarking to VCO production. Among the top
producers are ProSource International with production capacity
of 50,000 liters per month, Splash Pharmaceutical Company
with total start-up investment of PhP 150 million for its VCO business (including distribution and
marketing, and ABS Gen Herbs International Corporation which is among the leading herbal food
supplement company in the Philippines.
One of the VCO producers in the region is Kaagapmuco which is also among the recipients of SAISBC support. Current production volume is still low and operations are intermittent. The most wellestablished producer of VCO in Caraga is the Celebes Agricultural Corporation. Celebes is a primary
source for the "Organic Certified Virgin Coconut Oil RBD Coconut Oil, Crude Coconut Oil, Cochin
Oil, and its by-products like copra cake, copra meal, coconut flour, and coconut acid oil
g) Coco Coir Companies
There are 23 small to medium sized decorticating/coir processing plants in the Philippines. A
decorticating plant needs about 20,000 pieces of coconut husks for an eight hour operation. There were
a number of community-based coir processing plants set-up by various development projects but many
have intermittent operations.

10

Among the SAIS BC supported groups, , Bislig Producers MPC, Wescopromaco, and Clacofamco
have started producing baled coco fiber but in low volume and still in the start-up phase. The other
cooperatives still have to finish the set-up of the processing plant, while others are waiting for the
release of their equipment under. In the area of Bislig, a private company, Florland, also produces
baled fiber in a small scale and delivers this to Regwill in Davao City. Celebes produces cocofiber and
sells this in the export market only.

11

CARAGA COCONUT (COCO FIBER) VALUE CHAIN MAP SCHEMATIC

DIAGRAM
EXPORT

Exporters (Regwill )

FIBER PROCESSING
BALING OR
TWINING

Local Miners (Mining

Chamber of Cagraga)

Bislig PMPC
Has been
supplying to
Regwill

CLACO
FAMCO
Recently
started
operations
in October

DECORTICATION

FlorLand
Ventures

MINING

Coop Dev.
Authority
(CDA)

MLGUs
City LGUs
Phil.
Coconut
Authority
(PCA)

Community
Based weavers

DA PCA
DOST
Mines and
Geosciences Bureau

Municipal and City

LGUs
Local financial

SAIS BC Program
under DA that would
terminate in 2010 for
Organizational Dev.

HUSK
COLLECTION
Hauling

COCONUT
PRODUCTION
Growing/
Harvesting/

Member
Suppliers
17

INPUT SUPPLIERS Commercial

Fertilizers

CAPACITY
BUILDERS

Non
members
200

Planting Mats
from coop

Non
Members

Members
97

Other coconut
farmers

150

Planting Mats
from coop

SUPPORTERS

Commercial
Fertilizers

Own farm
inputs

FACILITATORS

DA PCA
Mines and
Geosciences Bureau

Municipal and City

LGUs
Local financial

Commercial
Fertilizers

INFLUENCERS

OPERATORS
12

CARAGA COCONUT (COPRA) VALUE CHAIN MAP SCHEMATIC

DIAGRAM
OIL MILLING

Oil Mills in Cagayan Iligan,

Cebu and Davao

COPRA WHOLESALING
MUNICIPAL LEVEL

COPRA CONSOLIDATION
LOCAL LEVEL

Coop Dev.
Authority
(CDA)

Oil Mill Buying Stations (i.e

POMS ventures in
Surigao city and Granex)

WESCOPR
OMACO

Local
Consolidators

Municipal Traders in the

town centers

TAGIN
DECO

COPRA PRODUCTION
Splitting and Drying

COCONUT
PRODUCTION
Growing/Harvesting/
Dehusking

Member
s
18
117
Member
Suppliers
65
70

INPUT SUPPLIERS Commercial

Fertilizers

CAPACITY
BUILDERS

Non
members

Planting Mats
from coop

Non
Member
s

Planting Mats
from coop

SUPPORTERS

DA PCA
DOST

KAAGAP
MUCO

DA - PCA

Own farm
inputs

FACILITATORS

Phil.
Coconut
Authority
(PCA)

Municipal and City

LGUs
Local financial

SAIS BC Program
under DA that would
terminate in 2010 for
Organizational Dev.

Non
Members

Members
505
338

Commercial
Fertilizers

MLGUs
City LGUs

Municipal and City

LGUs
Local financial

Commercial
Fertilizers

INFLUENCERS

OPERATORS
13

CARAGA COCONUT (VIRGIN COCONUT OIL AND WHOLE NUTS) VALUE CHAIN MAP SCHEMATIC
DIAGRAM
END CONSUMER

Franklin Baker Davao

Desiccated Coconut

Local Consumers

Coop Dev.
Authority
(CDA)

VCO WHOLESALE
Local stores

RETAILING

KAAGAP
MUCO

VCO PROCESSING

WHOLE NUT

DA PCA
DOST

Member
Suppliers
17

INPUT SUPPLIERS Commercial

Fertilizers

CAPACITY
BUILDERS

Phil.
Coconut
Authority
(PCA)

Municipal and City

LGUs
Local financial
Support
SAIS BC Program under
DA that would terminate in
2010 for Organizational
Dev.

BISLIG
MPC

CONSOLIDATION

COCONUT
PRODUCTION
Growing/Harvesting/
Dehusking

MLGUs
City LGUs

Members
18
117

Non
members
150

Planting Mats
from coop

Planting Mats
from coop

SUPPORTERS

Non
Members
DA - PCA

Commercial
Fertilizers

FACILITATORS

INFLUENCERS

Municipal and City

LGUs
Local financial
Support

OPERATORS
14

E. RELATIONSHIPS/INTER-FIRM COOPERATION

Smiley description of
relationships with different
players by the coconut
cooperatives (Business planning
workshop output)

The relationship matrix below describes the horizontal collaboration among coconut farmers and the
vertical relations between the cooperative consolidators and the farmer suppliers as well as the
cooperative coco fiber processors and the existing lead firms. Although Caraga coconut farmers have
been supplying and participating in the copra industry for a long time, it can be gleaned that the
industry is still very atomistic and fragmented. Focusing on the coco fiber industry, there is a low
level of existing collaboration between vertically integrated players. This may also be due to the fact
that the industry is still at a very early stage where existing coconut industry players are still trying to
find their role. Relationships have been built between the coconut farmer members of the cooperatives
but these are mainly based on the copra trading structure. Out of the 6 assisted cooperatives, only 3
are operating but still in the start-up phase.

15

Horizontal Collaboration

Vertical Relationship

Coconut Farmer Suppliers

Cooperative
Consolidators/Processors
Farmers/Suppliers
Information Sharing and Transparency
Sharing of information and Spontaneous information flow
farming practices are done on markets and production
informally among farmers in practices and processing
contiguous
farms.
Formal techniques to cooperative
sharing of information usually members.
happens
during
training
sessions conducted by the The annual general assembly is
CDA, PCA or the DA.
the main instrument for the
cooperative to share the
financial reports and updates.
Non member suppliers acquire
information only when
transacting with the cooperative
on an intermittent basis.

Value Added Services/Cooperation and Collaboration

Main means of collaboration is Cooperative consolidators act as
via the coconut farmers the market intermediary of the
cooperatives. Most of them farmers produce collecting the
were revived from the previous products and selling in bulk of
failures while the others were processing in fiber/nets.
newly formed. Given this
nature, the cooperatives still There is a high degree of
needs
organizational collaboration among memberdevelopment and frequent suppliers and the cooperative
backstopping from the LGU since the members are assured
focal persons.
of a market for their produce
while supply is available for the
There is an ongoing initiative cooperative to process.
(although still weak) of
collective marketing between Non members also find the
farmers (both members and non collective marketing and value
members) in selling their added processing offered by the
products to the cooperative cooperative attractive such that
consolidators.
it has become a means to
expand its membership to other
suppliers in the area.

Supplier and Buyer Selection and Procurement Process

Coconut farmers still sell to the Since the cooperatives buy the
traditional buying stations of husks which are usually already

Cooperative Processors Exporters/lead firms

There is limited information

sharing among cooperative
processors wanting to engage in
trading with exporters of
coconut fiber. Suppliers are not
allowed to go inside the
processing plant.
In a special case experienced by
1 cooperative, the lead firm who
was also the supplier of the
equipment assisted in the start
up operations of the baled fiber
processing. Information was
provided in terms of equipment
maintenance, quality
specifications and quality
control. However, this was not
replicated in the other
cooperatives.
There is predominately an arms
length based relationship
between the cooperatives and
the lead firms. Exporters/ lead
firms determine the price and
have set the quality standards
for any suppliers to follow. One
cooperative did not continue to
supply to the exporter due to the
low price offer.
Since the supply of the products
(coco fiber) is still limited and
there are still inefficiencies in
the equipment to be able to
meet the requirements,
cooperatives find it difficult to
negotiate for a better and long
term marketing/supply
agreement.

Selection of baled coco fiber

suppliers are based on quality
16

Horizontal Collaboration
Coconut Farmer Suppliers

oil mills in the town markets.

This is usually because they
have long standing loans or
cash advances.
Coconut
farmer
members
prefer to supply their husks to
the cooperative with the
decorticating facilities due to
the no cash incentives.

Vertical Relationship
Cooperative
Consolidators/Processors
Farmers/Suppliers
considered farm wastes, supply
and suppliers are many and they
have to prioritize where to get
the
supply.
Cooperative
processors
prioritize
husk
collection from the members
followed by the non members.
Despite the motivation of the
cooperative to the members,
there are still inactive members
who prefer to wait and see
until
the
cooperatives
enterprise is fully operational

Cooperative Processors Exporters/lead firms

standards. Exporters set
dimension and weight of the
baled fibers.
For buyers of coco nets and
twine they are still in the initial
try out stage of the products
from the cooperatives. The
Mining companies are
comparing these to the
nets/twine sourced from Bicol.

17

Section 2:
MARKET ASSESSMENT
A. MARKET TRENDS
1. Copra/Coconut Oil
Copra has perennially been of short supply during the recent past years. Crushing capacity of oil mills
in the Philippines is over 4.5 million MT of copra per year, double that of copra supply. As per PCA
Coconut Industry Development report, copra production in Mindanao is projected to reach about 7.5
million metric tons for the period covering 2005-2010. With the current huge demand for copra by oil
refinery mills in Mindanao, this projected target can only fill 55 percent of the demand during the
same period. The combined copra requirements of the six regions of Mindanao covering the same
period have been estimated by PCA at 13.7 million metric tons. Except for Celebes Oil Mills which
reportedly has more than 300% utilization, majority of the mills are underutilized. As such, increase
in production volume of coco farmers can be readily absorbed by mills in Mindanao. Below are the
list of oil mills in Mindanao and their respective rated milling capacity:
Copra Crushing Capacities of Mindanao Coconut Oil Mills
As of 30 June 2009
Company
Rated Milling Capacity (in MT)
Region IX Western Mindanao
510,000
Interco Manufacturing Corporation
180,000
Philippine International Development
120,000
Unicab Industries
45,000
Wilmar Edible Oils Philippines (Roxas)
165,000
Region X Northern Mindanao
1,059,000
Wilmar Edible Oils Philippines (Gingoog)
216,000
Cagayan de Oro Oil Company
120,000
Limketkai Manufacturing Corporation
37,500
Lanao Milling Corporation
12,000
Muenster Ingredients Manufacturing
7,500
Third Millenium Oil Mills, Inc.
150,000
Osamco Manufacturing Corporation
66,000
Granexport Manufacturing Corporation
270,000
Iligan Bay Milling and Trading Corporation
180,000
Region XI Southern Mindanao
852,000
International Copra Export Corporation
157,500
Legaspi Oil Company
157,500
New Davao Oil Mill
90,000
Pacific Oil Farmers
66,000
Asia Pacific Oil Manufacturing
22,500
Mindanao Coco Development Corporation
22,500
Freyvonne Milling Services
4,500
Interco Manufacturing Corporation
142,500
18

Copra Crushing Capacities of Mindanao Coconut Oil Mills

As of 30 June 2009
Company
Rated Milling Capacity (in MT)
Coco Davao, Inc.
9,000
Cargill Philippines
180,000
Region XIII - Caraga
30,000
Celebes Oil Mill
30,000
Region XIV - ARMM
52,500
BJ Coco Oil Mill
52,500
Total - Mindanao
2,503,500
Source: UCAP Coconut Industry Kit, July 2009

On the average, 70% of the total Philippine coconut oil production is exported. It is traded in the
world market along with other vegetable oils and fats. Since coco oil is only on the average about 4%
to 5% of the world fats and oil market, it is very vulnerable to price movements of soybean and palm
oil which supply more than 60% of the vegetable oils and fats trade. As such, coco oil importers are
generally price takers. There are several factors that can influence the pricing of coconut oil but
generally it all boils down to supply and demand. Nonetheless, it has remained premium oil over
most of the others - and definitely the highest priced oil among the so-called tropical vegetable oils, due to its properties and distinct usage. Coconut oil is valued for its high lauric fatty acid content,
which is the base material used for detergent and cosmetic products.
The growing local consumption of coconut oil has helped significantly in sustaining the price of
copra. The buying price of domestic coconut oil was in many times during the year higher than the
export price. In 2008, the average monthly coco oil domestic consumption was at 70,000 MT. The
coconut oil edible users had an average consumption of 45,000 MT per month while oleochemicals
used about 20,000 MT/month. Biodiesel companies had average consumption of 5,000 MT/per
month. The monthly requirement of biodiesel companies in 2009 was estimated to increase by 100%
with the increases from the one per cent biodiesel blend to two per cent blend as mandated
by the Biodiesel Law.
Both in the domestic and export markets, price and demand of coco oil is very much influenced by
price of substitutes especially the palm kernel oil. Likewise, buying price of copra has some variations
among the various ports of loading. It is, therefore, important for farmer cooperatives engaged in
copra trading to make careful calculations on logistics/transportation costs to various ports of loading
vis--vis buying price. Below is a snapshot of the average prices of copra in various loading points in
Mindanao during the last quarter of 2009:
Average Prices of Copra in Ports of Loading in Mindanao (PhP/100 kilos delivered bodega)
Port of
Oct/09
Nov 21/09
Nov 28/09
Dec 5/09
Dec 12/09
Dec 26/09
Loading
Surigao City
1709.00
1730.00
1768.00
1784.00
1790.00
1810.00
Nasipit
1684.00
1705.00
1743.00
1759.00
1765.00
1785.00
Medina
1689.00
1710.00
1748.00
1764.00
1770.00
1790.00
Gingoog
1814.00
1818.00
1850.00
1850.00
1870.00
1900.00
Cag de Oro
1782.00
1796.00
1850.00
1820.00
1870.00
1850.00
Iligan City
1699.00
1720.00
1758.00
1774.00
1780.00
1800.00
Ozamis City
1694.00
1715.00
1753.00
1769.00
1775.00
1795.00
Dipolog
1735.60
1761.00
1725.00
1745.00
1787.00
1825.00
19

Average Prices of Copra in Ports of Loading in Mindanao (PhP/100 kilos delivered bodega)
Port of
Oct/09
Nov 21/09
Nov 28/09
Dec 5/09
Dec 12/09
Dec 26/09
Loading
Zamboanga
1760.60
1786.00
1750.00
1770.00
1812.00
1850.00
Basilan
1740.60
1766.00
1730.00
1750.00
1792.00
1830.00
Mati
1760.60
1786.00
1750.00
1770.00
1812.00
1850.00
Davao City
1716.40
1750.00
1762.00
1776.00
1800.00
1800.00
Cotabato City
1756.00
1785.00
1795.00
1795.00
1815.00
1845.00
Gen Santos
1761.00
1790.00
1800.00
1800.00
1820.00
1850.00
Source: UCAP Weekly Bulletin

Importing countries particularly the EU require that copra meal brought to them must not exceed the
aflatoxin limit of 20 parts per billion (ppb) and crude coconut oil, the polycyclic aromatic
hydrocarbon (pah) limit not to exceed 25 ppb within it the benzo@pyrene (BaP) component not
exceeding 5ppb. These two (2) chemical compounds, which are carcinogenic and therefore health
hazards, are acquired from using the traditional smoke (landahan/ganggangan) dryers and from poor
and improper use of other drying methods or procedures in making copra like drying them under the
direct heat of the sun. Likewise, storage practices of traders often leaves copra at an unsafe moisture
content for longer than 48 hours and result in a greatly increased risk of mould and aflatoxin
contamination. When the crushing plants process this inferior quality copra, the aflatoxin is carried
over in copra meal, a by-product in oil extraction, while the "pah" is carried over in the extracted
crude coconut oil.
To improve quality of copra and enable farmers to get a premium price for their produce, the use of
kukum dryers is being promoted by the PCA Caraga. One of the early adopters is the Wescopromaco
Cooperative, a group being supported by the SAIS-BC project. The kukum dryer produces white
copra which has been proven to effectively control the growth and contamination of aflatoxin-causing
molds because the more reddish, the copra, the more aflotoxin it has.
Economic analysts foresee further tightening of supply of copra in the coming years unless the
industry pursues a cohesive and intensive approach to address coconut production, productivity, and
quality problems.

2. Coco Coir
The coconut husk is a by-product of the coconut industry and is wasted in many areas or left on the
fields as a mulch or used as fertilizer because of high potash content. Coconut husks are made of
bristle fiber (10%), mattress fiber (20%) and coir dust and shorts or wastes (70%) on a dry weight
basis. The ratio of yield of long, medium and short fiber, respectively, is on average 60:30:10. These
husks can be used in three ways: a) for extraction of coir fiber; b) as domestic fuel; and c) for soil
moisture conservation by burying in coconut lands.
Coconut fibers have high lignin content and thus low cellulose content, as a result of which it is
resilient, strong and highly durable. The remarkable lightness of the fibers is due to the cavities from
the dried out sieve cells. Coconut fiber is the only fruit fiber usable in the textile industry.

20

The demand behavior for coir is pushed by the eco-friendly

characteristic of the product. Traditionally, coir has been
processed into a range of products such as yarns for the
production of floor coverings, mats and matting, cordage
and nets, bristle fibers for brooms and brushes, and for use
with domestic mattress and upholstery industries. Coco coir
is now widely used as basic material in making nets, rolls,
and mats for protective covers for soils and slopes.
Geotextile nets or coconets, which are made from coir fiber
twine woven into high strength mats, is preferred over
concrete bricks and peat moss because it is cheaper and
completely biodegradable. It is also an excellent growing
medium for plants and grasses since the fiber has natural
rooting hormones and excellent water holding capacity.
Likewise, the geotextile finds important use in shoreline
stabilization and desertification. As a natural material for
soil erosion control, coco geotextile has elevated the
importance of coconut husk several notch higher from an
otherwise known waste product of coco processing. The
field was pioneered by an agricultural engineer, Dr. Justino
Arboleda, which gained him international recognitions.
A by-product of coir fiber extraction is the coir pith.
Coconut Peat or often called as Cocopeat has a high
lignin (31%) and cellulose (27%) content and a carbonnitrogen (C/N) ratio of 104: 1. It also has a very high
water holding capacity of 5 to 6 times its weight. It
should be noted that Coconut Peat is stable because of the
presence of high percentage of lignin. Thus, the peat left
to itself takes decades to decompose. The composted peat
is used along with organic supplements in crop fields in
horticulture and floriculture. It is also used as rooting and growing medium for certain ornamental
flowering plants. Decomposed coconut peat is also used as hydroponics systems for growing roses
and vegetables under controlled conditions. The coconut peat in sterilized condition finds use in
mushroom cultivation and floriculture. It is also used as an alternative for 'Peat Moss'. Coconut Peat
has a calorific value of 3975 k cal/kg, close to 4200 k cal/kg of coal. It is also used as fuel briquettes
with ash content 1/10th of coal.
China remains the top importer of Philippine coco fiber products, both for processed and raw. Based
on the international fiber trade, China is still the top importer of fiber followed by Netherlands, Spain,
Japan, and Germany. In 2007, the DA was reported to have signed an agreement with Zongbao Fiber
Company for the supply of 100,000 MT of coco coir fiber. Philippine exports of baled coir to China in
2008 decreased in terms of volume but increased in value. Overall, export volume and value of baled
fiber in 2008 increased both in terms of value and volume over 2007 figures. Export statistics
indicate a 40% increase in unit price of baled fiber in 2008 over 2007.
Baled Coir: Export Performance
Destination
China
Taiwan
Hongkong
Singapore

2007
Volume (MT) Value (US$)
3,781
409,924
1,192
138,392
190
20,211

2008
Volume (MT) Value (US$)
3,290
513,531
1,420
189,137
482
93,250
250
44,900
21

Baled Coir: Export Performance

Destination
Others
Total

2007
Volume (MT) Value (US$)
102
25,544
5,265
594,071

2008
Volume (MT) Value (US$)
384
81,568
5,825
922,386

Source: PCA
Share of Philippines to world exports of coir products is still low. Sri Lanka is the single largest
supplier of coir fiber to the world market and together with India accounts for almost 90% of global
coir exports. Although Sri Lanka has traditionally been the lead exporter of coir fiber and pith, India
holds the dominant position in terms of revenue generated by the industry, given the higher valueadded component of its coir exports. For Philippines to increase its market share, product quality has
to be at par with India and Sri Lanka. Volume and economies of scale are also vital factors especially
for Caraga coir cooperatives intending to export since shipping costs from Davao and Cagayan de Oro
is 300% higher compared to Manila.
Main export market for coco peat/dust is Korea. Export volume and value in 2008 decreased over
2007 performance. Unit price increased by 13% in 2008 compared to 2007 figures. In 2008, 10 MT
of coco net was exported to Japan with a value of US$ 15,175.
Coco Peat/Dust: Export Performance
Destination
Korea
China
Taiwan
Hongkong
Singapore
Others
Total

2007
Volume (MT) Value (US$)
2,705
437,161
1,386
156,551
48
5,332
161
24,050
155
17,838
238
58,579
4,694
699,511

2008
Volume (MT) Value (US$)
1,376
290,512
1,356
146,781
488
78,662
316
48,024
189
35,202
132
48,969
3,857
648,150

Source: PCA
The coir industry stands to benefit from the following international opportunities:
-

The Clean Development Mechanism (CDM) of the Kyoto Protocol offers significant international
opportunities for the coir industry. Under the CDM, firms in industrialized countries can earn
Certified Emission Reductions (CERs) by investing in environment-friendly projects in
developing countries.
China. According to the Sino-Malaysia Science and Technology Cooperation Project, live
desert is moving towards cities, provinces, agricultural areas, and livestock pasture areas in China
at the rate of 2,460 sq km per year. A total of 2.6 million sq km or 27.3% of Chinas total territory
is already affected by desertification. China also has numerous building construction and floodcontrol projects that are in need of erosion-control measures. It is projected that China will require
96,000 MT of coir per year and 4,800 MT coir peat annually.
Korea and Japan. These countries allocate funds for environment-related projects. Like China,
they give high priority to the landscaping of public areas and highway shoulders that run
thousands of kilometers. It is projected that there will be high demand for erosion-control
materials and coco peat in these countries.
22

Europe, United States, and Canada. Coir products for horticulture applications- plant liners, coco
peat, totem poles. The bulk of coco peat exports to Europe and Canada come from Sri Lanka
while Korea and Japan source from neighboring countries like the Philippines.
Coir fibre products for soil strengthening as reinforcement in tropical soils have been shown to be
effective. In horticulture sector, natural fibre can play a vital role (with reasonable strength and
disposability) in transporting flowers, vegetables, fruits, etc. pots for planting..

Netherlands. The total size of the market for geotextiles in the Netherlands is approximately 10
12 million square meters annually. According to estimates of the Dutch Road and Hydraulic
Engineering Division (DWW) of the Directorate General of Public Works and Water
Management, the market share of biologically degradable geo-textiles amounts to 3% to 5% of
the total market. Estimates by the DWW foresee a possible growth of the market share of
biologically degradable geo-textiles of 15% in the coming years. Exporters form developing
countries could profit from this rising market share.
Likewise, about 2 million pots of plants are produced consuming about 30,000 tonnes of synthetic
plastics. Biodegradable pots using natural fibres can be produced replacing synthetic plastics.

The automotive and upholstery industries also recognize the eco-friendliness of rubberized,
molded coir products. In addition, new uses of coco coir are being developed all the time (e.g., as
reinforcing material in composite products such as fiber boards and insulation boards). Industry
application for coco coir fiber is making its way in the European automotive industry. Coco fiber
is seen to be a good alternative to reduce cost and weight in automotives. Similar to Abaca, the
coco fibers are placed in car seats and cushions. In a report by the APCC, several European firms
are testing the effectiveness of coco coir as bio composites in the automobiles, or as thermal
insulation in home construction.

To boost domestic market for coir products, the following directives were issued by the government:
-

Memorandum Circular No. 25 directs all national and local government agencies, bureaus, and
other instrumentalities, including agricultural institutions and councils, to use coco peat or coir
dust and coconut fiber materials for soil conditioning and erosion control.
Administrative Order No. 43 encourages the use of containers or receptacles (for plantable
seedlings) made from indigenous organic materials like coconut husk, coconut coir, coco peat, or
other plant fibers.
Administrative Order No. 11 recommends the sustained use of coco peat or coir dust as a
complementary soil amendment (conditioner) for improved crop yields during normal times
and as a drought-mitigating measure during El Nio years.
The Department of Environment and Natural Resources (DENR) also issued a circular regarding
the use of coir pots for reforestation nurseries.
The Department of Public Works and Highways (DPWH) issued also a circular, ordering the
incorporation/inclusion of geotextile in the designs made by the Department for construction of
roads and highways. At present, imported synthetic erosion control materials are used to stabilize
highway shoulders and eroding sections of roads. The use of locally made geonets can push the
demand, of which a mere 10% estimate translates to about 500 MT geotextile per 1,000 km per
year.

The demand for geotextile in the domestic market is expected to increase with the intensification of
subdivision projects all over the country, the construction of golf courses, and government and private

23

sector projects on soil stabilization of river banks, strengthening and fortification of dikes of fishponds,
and water impounding projects for crop irrigation systems.
To date, the main market for baled coir fiber from Caraga is Regwill Industries of Davao City. The
company exports coconut based products like coconut fiber, coco peat, erosion control nets, bioorganic fertilizer, coco mats, coco chips, coco pots, bio logs, rubberized mats which they export to
several countries like Asia, Europe, Middle East and Africa. During the study, the company did not
allow interviews to be made. According to interviews with the SAIS BC supported cooperatives, the
company supplied the machineries/equipment recommended by PCA-Caraga which then paved for
the establishment of direct linkages with the cooperatives. The company has indicated that it can
purchase unlimited volume of baled fiber at a price of Php 10-12/kg.
Celebes Agricultural Corporation, a major exporter of coconut products and organic banana chips in
Caraga has been exporting baled coconut fiber to China and other countries. The company sources
coconuts from farmers and traders all over Caraga. According to the companys website, the main
objective for establishment of the coconut coir factory is to turn waste into income for their coconut
farmer suppliers. The plant is equipped with tubs for soaking the husk, machines that separate the
coconut husk from the shell, and a machine to process the husk into fiber.
For the geotextile/net, major/preferred market of the groups is the regional market. CARAGA being a
home to various mining companies is a very attractive market for geotextiles/net. Currently, these
mining companies are getting supplies of geo-nets from as far as the Bicol Region. The mining
companies use the nets for the rehabilitation of the mining areas. Likewise, an initial talk with the two
mining companies in Surigao del Norte (Taganito Mining Corporation and Hinatuan Mining) on the
use of geo-nets as material for erosion control in their mining sites resulted to a positive response.
Initial demand of the two mining companies for its 500 hectares needing erosion control is estimated
at 100,000 rolls of geo-nets (@200 rolls/hectare). Based on original business plans of the coconut
cooperatives, there were also possible demands on geotextiles for the DPWH and NIA for 1000 rolls
and 500 rolls, respectively.
Claver LGU has facilitated a MOA with the mining companies in the supply of coco nets from
Clacofamco. During visits conducted, the cooperatives showed that they already have orders from
these mining companies but do not have the capacity yet to supply because of the lack of volume and
the inability to process since they are still in the set-up stage / completion of the processing facilities.
In an attempt to support the coconut cooperatives in meeting the potential market demand of the
mining companies in Caraga, the Mines and Geo-sciences Bureaus (MGB) convened the Mining
Chamber of the Region together with the coco coir producing cooperatives. Initial agreements
centered on the supply of geotextiles from the group with the MGB as the conduit. The memorandum
of understanding between the group was already formalized and price has already been set. To further
support and strengthen the cooperatives position, the coir fiber producing cooperatives in the region
(under the SAIA BC project) have decided to federate themselves and engage in collective marketing
and pool their produce and sell these to the mining companies.
3. Virgin Coconut Oil
The virgin coconut oil (VCO) is extracted directly from the fresh, mature kernel of coconut by
mechanical or natural means, with or without the use of heat, without undergoing chemical refining,
bleaching, or deodorizing. The traditional coconut oil product is extracted from copra or dried, mature,
coconut meat. Coconut oil from copra has to be refined, bleached and deodorized to make it suitable
for human consumption. Hence, it is generally called RBD coconut oil and is yellow in color,
odorless and tasteless. On the other hand, VCO is colorless or water clear and has a natural coconut
aroma/scent which differs in intensity depending on the process used in extracting it. VCO is suitable
for consumption without the need for further processing.

24

The way by which the VCO is produced, packed, and distributed as well as the limited volume of
production account for the most for the relatively high price it commands vis--vis the traditional
coconut oil. For the period 2004 to 2008, export price of VCO ranged from US$ 2,692.12/MT FOB
(2007) to US$ 3,400.56/MT (2005). During the same period, the price of refined/bleached oil ranged
from US$ 557.18 to US$ 1,232.79/MT FOB while RBD coco oil (refined, bleached, and deodorized)
had a price range between US$ 606.86 to US$ 1380.16/MT FOB.1 Within this five-year period, the
average price of VCO is 400% more expensive than cochin oil and 370% higher than the RBD oil.
In 2008, VCO was among the top 5 non-traditional coconut exports of the Philippines with the
natural health food sector as its major market. It is a highly regarded functional food for its antiviral,
antibacterial, antimicrobial, and antifungal action. There is also a growing market demand for use of
VCO as major base oil for hypoallergenic cosmetics, as hair and skin conditioners and as carrier oil
for aromatherapy/ massage oils.
VCO exports have significantly increased during the last five years. From a mere US$ 0.553 million
in 2004, exports have increased to US$ 5,342 million in 2008. Similarly, export volume increased
from 172 MT in 2004 to 1,639 MT in 2008. Export sales in 2009 (as of September 2009) dropped by
around 27% due to the worldwide recession.
Virgin Coconut : Export Performance
Destination
United States
Canada
Belgium
Australia
Germany
Taiwan
Malaysia
Others
Total

2007
Volume (MT) Value (US$)
999
2,840,940
666
1,546,648
8
94
3
8
75
1,854

30,678
261,667
12,884
41,626
218,753
4,991,196

2008
Volume (MT) Value (US$)
862
2,891,961
395
1,080,857
115
337,866
59
259,908
82
245,612
40
141,321
22
112,734
65
271,787
1,639
5,342,046

Source: PCA
Functional or food supplements market requires organic and other relevant certification which
oftentimes, are be difficult and expensive (vis--vis scales of operations) for farmer-producers/micro
VCO companies to obtain and achieve. A potential opportunity for Caraga VCO producers is bulk
selling/exports to hypoallergenic cosmetics and specialty soap companies which generally do not
require organic certification.
VCO is marketed as a food supplement in the Philippines. Innovations have been made in the
presentation and packaging of the VCO for the consuming public. Apart from being sold in bottles of
various sizes, it now comes in capsules of 500 milligrams. Likewise, flavors such as banana, sweet
corn, jackfruit, have been added. VCO is also used locally in the manufacture of non-food premium
products such as soaps, shampoos, hand and body lotions, massage oils, etc. In the Philippines, herbal
medicine market is estimated to be about PhP 5 billion. Splash Pharmaceutical Corporation, aims to
capture 40% of the PhP 5 billion herbal medicine market with its VCO products. The virgin coconut
capsule fiber plus under the brand name Kolestrim of ABS Herbs International is exclusively
distributed by Getz Bros. Philippines, which has 90 years of distribution experience in the Philippines.
Thera Herb from Splash Corp is said to be the market leader in the local market.
1

UCAP Coconut Statistics 2008

25

B. IMPLICATIONS TO COOPERATIVES UPGRADING DIRECTIONS

Coconut production in Caraga during the last five years has steadily increased with some provinces
surpassing the national productivity level. However, the coconut industry in Caraga has lagged behind
in terms of tapping and maximizing the potential of the industry. Similar to the other coconut farmers
in the Philippines, the situation in Caraga holds the same such that farmers are still suffering from low
income which is aggravated with the fluctuating copra prices that largely depends on movements in
the world vegetable fats and oil market. Low income of farmers from coco farming activities are
primarily due to perennial problems as poor technology (limited to almost no application of
fertilizers), increasing senile trees, and low productivity. The support of SAIS BC has made headway
in realizing the need for value added processing anchored on the collective marketing initiatives of the
supported cooperatives. However, there is still a need to strengthen the industry, its players and
Caragas position in the Philippines. Below are the recommended upgrading directions for the new
entrants in the coco coir/fiber industry/coco processing business ventures:

Improve productivity of existing farms employing low cost practices. This would involve
developing a system of mass based technology awareness thru indigenous market based
mechanisms. The cooperatives that were capacitated by the PCA / DA may be the anchor for
continuous dissemination of these production technologies.

Develop standard operating system based on cooperative capacity and scale of operations for
the management and operation of the processing plants using environmentally sustainable
practices.

Strengthen organization in enterprise development and management using sound decision

making process and business principles. Improve business management skills to equip
members on marketing and processing operations.

Strengthen collective marketing for the cooperatives and facilitate market development,
advocacy and promotions.

Facilitate win-win relationships among existing and new players of the coconut industry as a
whole. Establish market linkages with lead firms (i.e coco fiber exporters and VCO industrial
users).

It is also recommended that as soon as the cooperatives are able to stabilize processing and marketing
operations of a main product (e.g., baled coco coir), it should look into expansion into an integrated
coco processing enterprise model that can be operated by a federation of coco cooperatives in
Caraga2.

During the Business Planning Workshops conducted by SDCAsia, the coco cooperatives have initiated the
formation of a federation including the election of officers.

26

Section 3:
FIRM LEVEL VALUE CHAIN ANALYSIS
The firm level value chain analysis looks into the individual operations of the 6 cooperatives
supported by SAIS BC in terms of its primary activities (inbound logistics, operations, outbound
logistics, marketing and sales and after sales) as well as the support activities. This section will look
into 3 operations namely: copra production / making by 3 cooperatives (WESCOPROMACO,
TAGINDECO and KAAGAPMUCO) and coco coir /fiber processing as operationalized by BCPMPC
and CLACOFAMCO. Although the KAAGAPMUCO, has been processing VCO utilizing its old
equipment, it has not yet tried processing VCO utilizing the new machines granted under the SAIS
BC project. SOEMCO, the 6th cooperative has not yet started it operations in relation to value added
coconut processing.

A. COPRA
Firm Activities
Description
INBOUND LOGISTICS
Currently there are 2 cooperatives involved in copra buying and trading and 1 cooperative involved in
copra making from whole nuts.
Firm Infrastructure
Copra Procurement
Supply procurement planning: weekly purchase planning is done but is
mainly determined by the available cash on hand the cooperative has for
purchasing of copra. For a cooperative with a direct marketing
agreement with an oil mill, purchasing is done with the copra supply
volume as the basis for their annual volume target of copra.
Management of purchasing operations: directly handled by the
cooperative assigned purchaser and assisted by laborers for weighing.
The cooperative book keeper and cashier provide payment and keep
manual record of weights. The cooperative general manager oversees
the overall purchasing activity.
Quality Control of purchased copra: the cooperative does not have a
moisture meter to determine moisture content. Instead, visual quality
inspection is done at the point of purchase.
Whole nut procurement for Copra
Supply procurement planning: weekly purchase planning is done but is
mainly determined by the available cash on hand the cooperative has for
purchasing of copra.
Quality control system: Maturity index is based on visual inspection on
the color (green and brown) of the whole coconut.
27

Firm Activities
Human Resources

Description

Technology
Development
Procurement

In house training of laborers by cooperative members on visual

inspection of delivered copra as well as correct weighing and tarring of
weights.
Cooperative members / purchasers in charge of buying copra derive
copra quality from the buying station of the oil mills which he
downloads internally to laborers and staff.
The cooperatives irregularly participate in PCA organized technology
info trainings on coconut production processes and value assed
technology.

The cooperatives rely on PCA R and D findings. Involvement would be

mainly on the production side implementing field trials of new varieties
like dwarf coconuts.
Copra procurement
Cooperative consolidators purchase copra from their members and non
member suppliers
Supplier Information: The cooperative has a supplier listing for member
and non member copra suppliers
Procurement practice/system: members deliver directly to the
cooperative warehouse for bigger volumes. While others deliver the
small volume copra to designated buying stations. Schedule of pick up
are disseminated thru the members of the cooperatives.
The cooperatives utilize their hauling trucks to pick up copra/whole
nuts.
Copra is delivered by the suppliers thru Carabao drawn carts or in
motorcycles. For bigger volume suppliers, they use tricycles and multi
cabs.
Delivered copra is placed in sacks and unloaded in the cooperative
warehouse ready for weighing.
Copra purchased has varied quality (moisture content) due to varied
drying techniques (sun drying and kiln drying) and drying times
depending on weather conditions.
One cooperative purchases whole nuts from their member and non
members

Whole nut procurement

Similar to copra, whole nuts are picked up from designated buying stations
for small volumes and direct to the warehouse for larger volumes and
payments transactions are done in the cooperative office. Whole nuts are
sorted based on color. Green nuts are rejected because these are immature
nuts and produce low quality/rubbery copra that is hard to dry and has a
high tendency to contract molds.
OPERATIONS
Copra Trading
The cooperative receives copra at their warehouse/storage area. The operations activity involves
weighing and sorting of the consolidated dried copra.
Sorting of copra is done manually utilizing visual methods. White copra with low moisture content is
noted as good quality copra that would yield higher coconut oil. Brown copra that is usually observed
during sun drying is usually reprocessed/re-dried to remove moisture. Green copra as evidence of
28

Firm Activities
Description
mold growth are discarded since this may contain Aspergillus flavus, a mold that produces aflatoxin.
Copra processing/making from whole nuts
After receiving of whole nuts, these are de husked, the husks are separated for fiber processing. The
nut with shell are split open using a machete and the coconut water is drained. Opened nuts are sun
dried using the cooperative owned cement pavement. Usual drying takes place for 5-6 days depending
on the weather. After drying, the copra meat are scooped out using a metal stick and visually
inspected for sufficient moisture content. Further drying is done for sorted copra with higher moisture
content based on sensory testing.
Firm Infrastructure
Weighing System at point of delivery in the cooperative warehouse
Sorting system based on copra color and moisture content
Quality control system: Qualitative sensory testing via the thumb
against the white meat (quick test for 6 percent moisture content). If the
copra kernel (white portion) does not stick to the thumb, and readily
drops when released, the 6 percent (approximately) moisture level has
been achieved.
Human Resources
Informal and in-house training of laborers on sorting dried copra via
color (white, brown and green) and thumb test moisture determination,
basic calculations for weight and % moisture.
Knowledge on copra making is acquired thru experiences which are
handed down from their elders.
The cooperative attends trainings sponsored by the local PCA office, but
these are intermittent and depend on the existing budget of the
cooperative or the PCA.
The cooperative does not have a fixed budget allocation for HR
development of laborers and staff members.
Technology
One cooperative has conducted pilot testing using kiln drying methods
to ensure whiter copra with lower moisture content preventing against
mold growth. Sun drying would take 5-6 days while direct or indirect
smoke drying (a type of kiln drying) would take a maximum of 4 days
Procurement
Weighing scales are maintained using test weights. The cooperative
purchases from a local hardware store weighing scales.
OUTBOUND LOGISTICS
Copra is stored in the cooperative warehouse on a weekly basis until the desired delivery volume (56tons) is achieved. Copra ready for delivery are packed in sacks with 50kg to 60kg weights. The sacks
are loaded in the hauling trucks and covered with a canvass. Delivery records are placed noted and
presented to the oil mill buying stations.
Firm Infrastructure
Manual Inventory of weekly copra stocks
Delivery receipts with total volume are sent together with the hauling
trucks for delivery.
Delivery Records and Payment Records are in place.
Safety warehousing and storage practices are lacking especially in the
design and maintenance of the storage facilities.
Human Resources
In house training on quality control inspection prior to delivery
Oil mill purchases also provide tips to cooperative suppliers on
maintaining quality of copra during transport.
Technology
Main concern faced by cooperatives is usually on the improper
warehousing facilities and design (limited protection from entry of
rain/moisture and pests) wherein their stocks are susceptible to moisture
29

Firm Activities

Procurement

Description
uptake and pests (i.e rat infestation).
The cooperatives are devising methods to hasten pickup and delivery of
the copra products by designating more buying stations with strategic
locations.

Used sacks are purchased from general agriculture supply stores in the
town centers. Usual sacks reused are those from sugar, rice and
sometimes feeds.
MARKETING AND SALES

Cooperatives with direct marketing agreement receive an annual purchase order from the partner oil
mill. The stated volume is then divided on a monthly basis to determine the monthly quota that the
cooperative will distribute among its member and non member suppliers.
Order processing without DCM: Since oil mill buying stations accept any volume of good quality
copra anytime, other cooperatives without any DCM only trade existing volume supplied by the
members and non members and these are bounded by existing cash on hand.
Firm Infrastructure

Initiatives on marketing and marketing management are tied with other

agricultural products that the cooperative trades such as palay or corn
thru the cooperative retail stores and warehouse.

Human Resources

Cooperative staff attends annual CDA training on book keeping and

general financial management for all cooperative products.
General manager acquires informal training on trading and handling
transactions thru day to day experiences and handed down from oil mill
purchasers.

Technology

Initiatives on improvement of quality of copra product and timely

delivery of purchase orders as per DCM.

Procurement

Higher consolidated copra volume for higher buying price: Cooperatives

maintain a minimum volume of copra that will be sold to the oil mill
buying stations and traders so that they will be provided with a stable
high price.
Direct Copra Marketing Agreement: honoring the DCM and
renegotiating annually the terms and conditions.
Face to face transactions and negotiations with buyers
Copra as a product has not been pushed/ marketed by the suppliers since
the market has been existing for a long time and it is only the price that
determines whether the cooperative sells within the week or waits for
the following week

AFTER SALES
Firm Infrastructure
Human Resources
Technology
Procurement

None
None
None
Face to face transactions from oil mill purchasers and buyers/traders.

Main gaps identified is mainly on maintaining copra quality after consolidation and the improvement
of drying methods to produce good quality copra with high oil content and no aflatoxin.

30

B. COCO COIR / FIBER PROCESSING

The analysis of the coco fiber operation is based mainly on the experiences of Bislig Producers MP
Cooperative and Claver Coconut Farmers Cooperative. Both cooperatives have started operations
after the receipt of the equipment provided under the SAIS BC project. Based on the interview
conducted, Bislig cooperative was able to deliver to the Buyer twice.
ACTIVITIES
INBOUND LOGISTICS
Firm Infrastructure

Human Resources

Technology

Procurement

Description
Supply procurement planning: husk procurement is based on the
targeted volume that the cooperative needs to be able to deliver to the
buyer and these are matched to the existing suppliers and their current
husk volume. Husk acquisition is mainly confined to the baranggays
within proximity to the processing plant. A hauling schedule is drawn
after canvassing of husks is completed and given to the driver and the
assistant.
Since operations of the 2 cooperatives are still in the infancy stage and
both are still in the process of maximizing the plant capacities,
procurement and hauling of husks are done on a need basis only.
Management of purchasing operations: Canvassing of available husk
supply is done by the project in-charge with the clerk as the assistant.
The driver together with the assistant weighs the husks at the
consolidation points and pays the farmers/husks owner and delivers the
husks to the processing plant.
Inventory and record keeping: Manual inventory recording in the raw
materials / husks log book.
Quality Control system for of purchased husks: visual inspection for
color (brown and yellowish green) and adulterants.
Cooperative members and production manager acquire technology
information from PCA which included hands on training.
Informal training to driver and assistant driver (hepe de viaje) on raw
material inspection and weighing skills.
No differentiation between brown husks (mature coconuts) to produce
brown fiber and green husks(young/immature coconuts) to produce
white fiber that is good for making 2 ply ropes due to its fine and
resilient bristles. Younger (yellowish-brown, greenish-brown) husks
produce good quality fibers.
Some of the member farms are involved in PCA commissioned new
coconut variety field testing.

Suppliers information: The cooperative has a list of and contact

information of the husk suppliers. Husk supply is taken from nearby
areas within 300 meters from the processing plant (this includes
neighboring brgys. ) Husks within the municipality are bought at a
higher price (i.e 0.25 cents), while outside of the municipality is 50-60%
less to account for transportation costs.
Husk collection is initially done via canvassing from member and non
member suppliers to determine existing volume of available husks.
Once the volume is sufficient to fill up the cooperative hauling truck,
this is picked up from designated consolidation centers and brought to
the processing plant for storage and/or direct processing. Payments are
usually cash basis after weighing is completed. There are coop members
as of the moment that gives their coconut husks to the cooperative for

31

ACTIVITIES

Description
free. When procurement and processing has stabilized, the cooperatives
have decided to pay certain amount to member for every supply of
coconut husks they get.
Visual inspection of the consolidated husks is performed to check for
other materials like stones or whole nuts, coco shells that might
adulterate the weighing and destroy the blades of the decorticating
machine. Color is also checked

OPERATIONS
The following are the general operations conducted within the fiber processing plants of the 2
cooperatives based on the existing equipment provided under the SAIS BC project.
Decorticating: Hauled coconut husks are soaked in water in a tub to soften and placed in the
decorticating machine where the fibers are extracted. The machine separates the fiber (40%) from the
peat or coir dust (60%). For efficient separation of the dust and the fiber, a manual sieve is used.
Currently, the coco peat/dust is placed in heaps beside the processing plant. The cooperative has not
yet defined clearly any activity transforming coco coir dust into other product formats for commercial
use other than packing the coco peat in sacks and given to members interested to apply the peat as soil
conditioners in their farm.
Drying: The wet fibers dried under the sun. In the drying process, the fibers are spread loosely in the
cemented solar drying pavement about 3 to 4 inches thick and turned after two hours of exposure until
a 15% moisture content is achieved. After drying, the fibers are now stored for bailing and packaging.
95% of the fibers are baled and the 5% are converted into twines.
Baling: Coco fiber is compressed using a baling machine with dimensions 0.7x0.7x0.35meters
weighing 43-45kgs/bale. The bales are tied with plastic ropes and stored in the warehouse.
Twining: Fiber is woven into ropes and geo-nets using the manual twining machines. Currently the
cooperative is still in the trial stage perfecting the different geo textile products.
Firm Infrastructure
Quality Control System: On process visual inspection conducted by
decorticating machine as well as baling machine operators. No QC
assigned to check on inventory of baled fiber.
Equipment maintenance and cleaning: current practice suggest that this
is done before and after an operation. Preventive maintenance are
lacking in system
Management of operations: Operations are being run by the hired
operators and laborers with the supervision of the project in charge
(usually from the LGU) and the chairperson.
Standard Operating Procedure: No written SOP for coco fiber
processing operation. Since the cooperative is still on the dry run stage,
they have not drawn up on paper the specific operating procedures and
standards.
Human Resources
Prior to operation the cooperative members were coached by the
equipment supplier in terms of operation, maintenance and trouble
shooting. No formal on the job training was conducted for its workers.
Skills were derived from internal hands-on and several dry run operation
on the decorticating and baling machines.
Experience was the basis for hiring machine operators and laborers. In
the Bislig cooperative some of the workers came from coco coir
32

ACTIVITIES

Technology

Procurement

Description
processing facility in the area. There are still those that have not yet
adjusted to the work especially in maximizing the stated capacity of the
machine.
Training on good quality fiber production is needed as well as quality
control system.
Trial and error in the standardizing and maximizing the full capacity of
the machines vis a vis the available inputs. Mechanical decorticating
and baling.
Product development and standardization of various geotexile products
like rope, geonets, biologs as well as coco coir dust product formats.
Standardization of procedures vis a vis maximizing capacity of
equipment and product quality standards monitoring is needed
Equipment purchase: certified equipment supplier by PCA Caraga
Region. The cooperative was the recipient of the equipment provided
under the SAIA BC project and had little knowledge on the equipment
specifications and performance.
Needed materials such as plastic ropes for baling and used sacks are
acquired locally.

OUTBOUND LOGISTICS
Firm Infrastructure

Human Resources

Technology

Procurement
MARKETING
Firm Infrastructure

Limited training on warehouse management and stock inspection

procedures. Quality control practices needs to be downloaded especially
in warehousing where sometimes insufficient drying may cause growth
of weeds and grasses in the baled fibers and these may be rejected.
The cooperatives are doing calculations on the best delivery scheme
(volume and time of delivery) to have more profits.
Rapid moisture testing methods needs to be devised to determine the
MC of the fibers since this in one of the needed quality requirements.
none

Human Resources

Technology

Quality Control System: Limited only to the counting of bales when

loading. Inspection of the baled finer should be done to check for wet
fibers, bales with weeds and integrity of the bundling of the bales.
Distribution System/Infrastructure: Direct selling to buyer utilizing
cooperative owned hauling / delivery truck.
Record Keeping: Delivered bales are manually recorded in the
production logbook and driver/hepe de viaje bring the delivery receipt.
Warehousing and storage infrastructure: Has in place a cooperative
warehouse which also doubles up as the warehouse for raw materials.

Financial Management System: Payment to the cooperative is done via

bank to bank transactions.
Transactions are done via the cell phone or thru sms exchange.
Marketing and sales manager are not fully trained on handling the
product as well as it product characteristics.
Informal training and coaching provided by LGU focal persons and
project in-charge on some marketing strategies.
Product testing with mining companies in comparison with the Bicol
made geonets. Cooperatives have provided samples of geo nets to
nearby mining companies to test the quality of the products.

33

ACTIVITIES
Procurement

Description

Attendance to trade fairs funded and organized by the LGU are the main
means of generating orders for coir fiber by products. The products are
together with the products promoted by the producers group.
Claver LGU negotiations with the Mining Chamber of Caraga has
gained positive feedback on the possible business engagement.
Bislig PMPC has developed a product information brochure given to
trade fair booth visitors.

AFTER SALES
Product feedback is acquired via face to face transactions during cooperative delivery to the buyers
processing plant.
Firm Infrastructure
none
Human Resources
No training on customer service or handling customer feedback.
Technology
Procurement
none

C. VIRGIN COCONUT OIL

Since the processing of VCO is yet to be fully operational, it is expected that Good Manufacturing
Practices should be followed in all areas of the operation. This includes among others the selections of
raw materials (fully matured, without sprout and no crack), efficient coconut milk extration utilizing
an expeller and press, the applicaton of correct fermentation seasoning temperature and environment.
Based on the interviews and the initial business plans, it is projected that the VCO equipment set-up
34

will produce 48 liters of VCO per day consuming 800 fully matured nuts. Premium quality virgin
coconut oil will be packed in 250 ml, 330 ml, 500 ml, and 1,000 ml bottles fordirect selling.
Currently the VCO of KAAGAPMUCO are sold by the gallons within the vicinity of Agusan del Sur.
The cooperative has done some experiments on the production of soaps and massage oild but this has
not be completed and ready for marketing.

35