Style Definition: TOC 1: Tab stops: 15.

22 cm, Right,Leader:
…

A Primer on PEF’s
Priority Commodities:
Industry Study on
Coconut
Table of Contents
List of Tables and Figures ............................................................................................... ii
List of Abbreviations ...................................................................................................... iiii
Introduction ..................................................................................................................... 1
What is the position of the coconut industry in the world economy? ................................ 1
What is the Origin of the Philippine Coconut Industry? .................................................... 3
What is the Current State of the Philippine Coconut Industry? ........................................ 4
What is the value chain system in the coconut industry? ................................................. 5
Is there Income from Coconut Production? ..................................................................... 7
What do farmers need to know about coconut production? ........................................... 11
What is the existing policy environment in the coconut industry? .................................. 15
What are the issues and challenges confronting the coconut industry? ......................... 18
Climate Change and Disasters .............................................................................. 19
Infestation .............................................................................................................. 20
Institutional fragmentation and policy bias ............................................................. 20
Inadequate provision for risks and losses .............................................................. 21
Reversing stagnation ............................................................................................. 21
Improving value chain coordination ....................................................................... 22
Selected Bibliography, Chapter 1 .................................................................................. 23

List of Tables and Figures

Table 1. Top CNO Exporters in the world (Value $ 1000) ...................................................... 2
Table 2. Top CNO Exporters in the world (tonnes) ................................................................. 2
Table 3. Top CNO Importers in the world (Value $ 1000) ...................................................... 2
Table 4. Top CNO Importers in the world (tonnes) ................................................................. 3
Table 5. Philippine Coconut Exports (Export Value $ 1000) .................................................. 4
Table 6. Philippine Coconut Exports (tonnes) .......................................................................... 4
Table 7. Estimated average income (before tax) of key participants in the coconut
market chains, Quezon, 2006. .................................................................................................... 7
Table 8. Expected Initial Income from Coco Sugar Production ............................................. 8
Table 9 . Investment Cost in VCO Production ......................................................................... 9
Table 10. List of Equipment for the Production of Coconut Flour and VCO (500 Nuts per
Day Capacity) .............................................................................................................................. 10
Table 11. Simple Cost and Return Analysis of Lakatan Under Coconut Using Two
Fertilizer Options ......................................................................................................................... 12

Figure 1. The Coconut Value Chain 1 ....................................................................................... 6

ii
LIST OF ABBREVIATIONS

AFMA Agricultural and Fisheries Modernization Act

BAS Bureau of Agricultural Statistics
CARP Comprehensive Agrarian Reform Program
CCA Climate Change Adaptation
CIIF Coconut Industry Investment Fund
CNO Coconut Oil
CSI Coconut Scale Insect
DA Department of Agriculture
DAR Department of Agrarian Reform
DCN Desiccated Coconut
DRR Disaster Risk Management
GOCC Government Owned and Controlled Corporation
HA Hectare
KG Kilogram
MT Metric Ton
NAPC National Anti-Poverty Commission
PCA Philippine Coconut Authority
PDP Philippine Development Plan
PEF Peace and Equity Foundation
PHP Philippine Peso
RAY Reconstruction Assistance on Yolanda

Sama-samang Aksyonng Gobyerno, Industriya at

SAGIP
Pamayanan sa Malawakang Pagsugpong Pesteng Cocolisap

SEC Securities and Exchange Commission

UCAP United Coconut Association of the Philippines
UNICOM United Coconut Oil Mills, Inc.
VCO Virgin Coconut Oil

iii
INTRODUCTION

The coconut palm, Cocosnucifera, a tree of the palm family Arecaceae, is one of the
most important crops of the tropics.1 It is dubbed the tree of life not only for the variety of
products that can be made from it but also for the variety of livelihoods that it can
support. Many seemingly ordinary items have by-products of coconut in them such as
soap. The health benefits of the coconut are also highly regarded by health experts and
practitioners around the world. Coconut water and coconut sugar have been highly
touted for being good alternatives for people with diabetes.

The coconut, being an important crop for Filipinos, is one of the priority crops in the
Peace and Equity Foundation’s (PEF) focus on social enterprises. This primer seeks to
give the PEF and its partners a wider understanding of the environment surrounding the
coconut industry.

WHAT IS THE POSITION OF THE COCONUT INDUSTRY IN THE WORLD

ECONOMY?

Coconut is a source of various types of raw materials such as coconut oil (CNO),
desiccated coconut (DCN), and copra meal aside from traditional food products such as
coconut meat and coco water. Given the more traditional culinary uses of coconut,
coconut raw materials are also used in various products such as soaps and textiles.
Coconut products are hailed for their health benefits, thus gaining popularity among
health consumers throughout the world. The coconut is also being utilized for biodiesel
because it makes engines more efficient in combustion, thereby reducing emissions.

Philippine coconut faces tight competition with soybean, corn, and other crops used for
vegetable oil in the world market. In fact, the American Soybean Association in the
United States made a smear campaign against coconut oil in the past to bar it from the
U.S. market. A number of scientific studies have since refuted this marketing ploy.2

Indonesia is the top producer of coconut products in the world, with the Philippines
coming in second. In terms of exports, the Philippines is the top exporter of coconut
products worldwide, especially in terms of CNO and DCN. This is due to Indonesia’s
preference for local consumption rather than export.3 The top exporters of CNO can be
found below.4 The Netherlands is a re-exporter of CNO for most of Europe.

1
Encyclopedia Britannica."Coconut palm." February 11, 2014.
2
Faustino, J. "Facing the Challenges of the Philippine Coconut Industry: The Lifeblood of 4.4 Million Coconut Farmers and
Farm Workers," EPRA (2006).
3
Ibid.
4Food and Agriculture Organization.(2013). “Trade.” FAO STAT.
 Table 1. Top CNO Exporters in the world (Value $ 1000)

Country 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Philippines 352,625 504,860 577,790 657,217 578,769 733,813 1,039,612 594,506 1,265,716 1,425,446
Indonesia 157,847 153,608 264,944 413,762 270,674 570,410 769,134 387,360 566,068 937,756
Malaysia 41,296 78,381 104,990 119,011 95,990 124,800 173,708 111,000 143,167 260,782
Netherlands 56,508 90,802 131,062 128,099 111,638 111,845 268,310 150,217 216,059 365,456
Papua New
Guinea 8,570 18,966 25,142 30,200 19,763 39,760 50,000 40,500 41,500 47,000
Source: FAO STAT. (2013). “Trade.” http://faostat.fao.org

Table 2. Top CNO Exporters in the world (tons)

Country 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Philippines 944,661 1,186,355 959,400 1,152,316 1,066,829 889,802 850,076 832,938 1,345,703 826,721
Indonesia 446,319 364,820 447,113 752,072 519,973 739,923 649,362 571,157 567,497 569,801
Malaysia 92,961 179,539 247,800 193,824 165,557 168,081 129,553 128,614 131,501 143,614
Netherlands 107,354 150,023 169,000 170,614 155,519 118,273 196,584 144,014 192,482 189,726
Papua New
Guinea 28,200 47,700 45,100 54,400 41,500 51,300 62,000 44,800 46,000 52,000
Source: FAO STAT. (2013). “Trade.” http://faostat.fao.org

The top importers of coconut products in terms of CNO and DCN are the European
Union (EU), China, Malaysia, the United States, and South Korea. The top importers of
CNO can be found below5.

Table 3. Top CNO Importers in the world (Value $ 1000)

Country 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
EU
(Total) 388,296 495,972 661,497 721,017 681,666 794,385 1,099,361 728,787 977,021 1,528,689
United
States of
America 172,593 175,488 266,504 287,667 295,351 385,191 663,636 414,139 567,852 926,591
China,
mainland 45,553 68,384 74,137 77,611 92,746 106,466 193,001 102,656 293,992 309,316
Malaysia 52,468 57,021 113,394 145,520 105,954 148,201 215,276 112,161 203,740 276,552
Republic
of Korea 18,686 22,560 34,541 36,173 34,226 49,480 83,186 45,788 67,035 97,145
Source: FAO STAT. (2013). “Trade.” http://faostat.fao.org

5
Ibid.

2
 Table 4. Top CNO Importers in the world (tons)

Country 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
EU
(Total) 925,433 1,001,964 1,008,063 1,091,780 1,090,003 958,221 879,047 883,339 1,125,344 911,181
United
States of
America 484,986 352,334 416,178 432,003 493,913 458,532 499,148 484,353 576,855 498,278
China,
mainland 118,960 152,167 116,407 125,649 166,170 125,254 146,171 140,079 307,155 170,194
Malaysia 137,267 281,887 196,575 251,408 184,290 165,343 147,451 151,715 194,313 162,595
Republic
of Korea 47,014 47,117 52,207 53,696 56,101 58,150 60,058 57,678 64,970 58,393
Source: FAO STAT. (2013). “Trade.” http://faostat.fao.org

WHAT IS THE ORIGIN OF THE PHILIPPINE COCONUT INDUSTRY?

The Philippine coconut industry’s roots can be traced back to the Spanish colonial
period. Through a gubernatorial edict in 1642, the Spaniards forced our ancestors to
plant coconut because they needed the fiber for their galleons.6 They also traded copra
for the manufacture of various products such as soap and margarine. In 1898, copra
export comprised five percent (5%) of the total commodity export of the Philippines.7

The Americans introduced milling and commercial coconut oil production in the
country.8It is estimated that the Philippines had 210,000 hectares of coconut area with
42 million coconut trees in 19059. The Americans introduced economies of scale based
on large-scale plantations that led to land monopoly. During the Commonwealth period,
the American colonial administration imposed an excise tax on all coconut related
imports. Part of the revenues was remitted back to the Philippines for the construction of
roads and various other public works. During the Commonwealth period, an average of
P21 million per month of excise money was the source of the annual national
budget.10The coconut crop areas further expanded after World War II, brought about by
rising demand for coconut products. In 1960, the area planted to coconuts expanded to
1.60 million hectares, increasing to 2.283 million or 42% in 1975. Copra production
doubled from 1.60 MMT to 2.216 MMT.11

In the 1970s, several levies, including the controversial Coconut Levy (more popularly
known as the ‘coco levy’), were imposed purportedly to raise revenues for further
development of the industry. The Philippine Coconut Authority or PCA, then also known
as PHILCOA, was established to coordinate the functions of other government bodies
relevant to the coconut industry. The “coco levy” was suspended in the 1980s due to the

6
Dayrit, F. "A Brief History of the Philippine Coconut Industry as Reflected in the PJS, 1906 to 2005," Philippine Journal of
Science.
7
PCA."History of Coconut Industry in the Philippines."
8
Ibid.
9 Ibid.
10 Ibid.
11
Ibid.

3
 controversy it generated. It has since been a source of pain for the industry up to this
day.

WHAT IS THE CURRENT STATE OF THE PHILIPPINE COCONUT

INDUSTRY?

The coconut is the country’s top export commodity making it its top dollar earner among
other agricultural exports. Earnings from the coconut industry ranked higher compared to
other agricultural commodities averaging US $ 1.58 billion from 2009 to 2011. 12Coconut
oil (CNO) tops the list of exports with around 1.3 million metric tons produced in 2010.
Desiccated coconut and copra meal are the two other highest ranked export
commodities.

Table 5. Philippine Coconut Exports (Export Value $ 1000)

Item 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Oil,
coconut
(copra) 352,625 504,860 577,790 657,217 578,769 733,813 1,039,612 594,506 1,265,716 1,425,446
Coconuts,
desiccated 94,798 95,749 99,743 127,136 138,548 159,362 240,356 145,757 152,608 286,766
Cake,
copra 25,158 35,598 31,066 28,061 30,368 43,159 58,273 48,193 78,383 58,796
Copra 746 120 17 47 2 102 801 60 239 282
Coconuts 914 728 817 1,024 867 550 809 712 815 3,664
Source: FAO STAT. (2013). “Trade.” http://faostat.fao.org

Table 6. Philippine Coconut Exports (tons)

Item 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Oil,
coconut
(copra) 944,661 1,186,355 959,400 1,152,316 1,066,829 889,802 850,076 832,938 1,345,703 826,721
Coconuts,
desiccated 106,973 106,798 105,829 125,540 136,080 131,961 142,664 116,402 109,168 108,867
Cake,
copra 385,454 507,648 364,241 430,241 429,876 425,409 437,051 402,705 723,081 314,338
Copra 2,744 300 38 65 6 104 104 84 304 274
Coconuts 4,140 1,188 3,116 3,130 2,306 1,086 1,892 1,925 2,578 7,605
Source: FAO STAT. (2013). “Trade.” http://faostat.fao.org

Data from the Bureau of Agricultural Statistics (BAS; as of 2013) indicate that the extent
of coconut cultivation is around 3.56 million hectares comprising around 25% of the total
agricultural lands in the country. The number of coconut farms is estimated to be around
1.4 million.13 The number of fruit bearing trees is estimated at 3.44 million.14Out of 79

12PCA."2013 Outlook for the Coconut Industry," Presented at BangkoSentralngPilipinas, March 6, 2013.
13
Dy, R. "The Philippine Coconut Industry: Performance, Issues and Recommendations," EPRA (2006).
14
Bureau of Agricultural Statistics."Country Stat Philippines". retrieved May 5, 2013

4
provinces in the Philippines, 68 are coconut-producing areas.15 The biggest producers
are Quezon (326,025 has.), Zamboanga del Norte (172,900 has.), Davao Oriental
(155,905 has.), Leyte (167,973 has.),Camarines Sur (119,045 has.), Zamboanga del
Sur (127,280 has.), and Misamis Oriental (103,258 has.). Big islands like Samar, Leyte,
and Masbate are predominantly coconut-based in agriculture production.

The extensive supply base feeds a group of large and medium-scale manufacturing
sector comprising:

 65 coconut oil mills with installed crushing capacity of 4.54 million MT per year;
 45 oil refineries with installed capacity of 1.53 million MT of oil per year (either
cochin and refined, bleached, and deodorized);
 10 desiccated coconut plants with installed capacity 132,700 MT per year; and,
 8 oleo-chemical plants that produce intermediate coco-based chemical products
like fatty alcohol.

However, the manufacturing sector is currently in a state of overcapacity because of

stagnation in the farm sector. 16 Most are operating below capacity for lack of raw
material supply. Many coconut farms are in need of rehabilitation. The fruit-bearing
trees are senile and need replanting. Coconut areas in the path of devastating typhoons
(like Yolanda in 2013 and Pablo in 2012) have practically lost the standing trees. More
recently, some provinces like Laguna have suffered setbacks due to massive infestation.

More significantly, despite the industry’s contribution to the economy and its huge
economic potential, coconut-producing provinces and coconut farmers are among the
poorest of the poor in the country. This poverty can only be explained by the inability of
producers to reinvigorate the production base to keep pace with the demand of the
manufacturing sector and exports.

WHAT IS THE VALUE CHAIN SYSTEM IN THE COCONUT INDUSTRY?

The versatility of the coconut and the variety of products that can be derived from it such
as food, furniture, textiles, clothing, fuel, health and beauty products, among others,
attract multiple actors that populate the supply chain. The value chain system is
complex with a long chain from the supply base to end users, and with various horizontal
and parallel channels.

15
Ibid.
16
Dy, R. "The Philippine Coconut Industry: Performance, Issues and Recommendations," EPRA (2006).

5
The Coconut Industry’s Strategic Plan for Philippine Agriculture 2020 summarizes the
coconut industry’s supply value chain in six stages, as can be seen below: 17

Figure
Figure 1.
1. The
The Coconut
Coconut Value
Value Chain
Chain 1
1

The PCA estimates that there are around 3 million coconut farmers and farm workers
and around 25 million more employed in various coconut based enterprises.18 There are
around 300 registered entities in the Securities and Exchange Commission (SEC)

17PCA. "Briefing Guide on the Subject: Coconut Industry Production Status, Growing Zones, Productivity and Potential to
Increase Nut Supply in Coconut Farms through Practical and Efficient Farming Technologies."
18
Pabuayon, et.al."Key Actors, Prices and Value Shares in the Philippine Coconut Market Chains: Implications for Poverty
Reduction," J. ISSAAS 15 (2009).

6
involved in the coconut industry ranging from farmer associations, civil society
organizations, and small retail stores to private businesses. These organizations are into
production, trade, and development. The discrepancy in the income levels of these
groups varies, depending on the product.

Farmers are at the bottom of the value chain, not only terms of their location in the
supply base but also in terms of access to economic benefits. A 2009 study by
Pabuayon et. al., "Key Actors, Prices and Value Shares in the Philippine Coconut Market
Chains: Implications for Poverty Reduction,” gives us a glimpse of this discrepancy.

Table 7. Estimated average income (before tax) of key participants in the coconut market
chains, Quezon, 2006.

Market Participant Products Produced/Sold PHP per Month

Farmer Husked nuts 892 - 1,138
Farmer/processor VCO 6,762
Trader Husked nuts, copra, charcoal 84,960
Oil miller Crude CNO, copra cake 0.80 - 2.55 million
Source: Pabuayon, et.al. (2009)

The United Coconut Association of the Philippines (UCAP), which has a multitude of
members comprised of traders, manufacturers, federations, and other types of
organizations is an important industry stakeholder. The DA, PCA, and the Presidential
Assistant for Food Security and Agricultural Modernization, are among the government
players.

IS THERE INCOME FROM COCONUT PRODUCTION?

True to its being a tree of life, the coconut can be a raw material source for various
products and correspondingly, livelihoods. Some products require significant
investments in facilities and equipment, managerial capacity, and intricate business
linkage. Others can be produced at the household and community levels. The most
traditional products that are well entrenched in the market are the following:

1) Coconut oil. The oil is extracted from mature nuts through wet or dry (from dried
nuts) process. The oil is used in a variety of ways, most commonly for soaps and
food products. Compared to other oils, CNO has multiple health benefits such as
increasing one’s resistance to diseases. The current price of CNO (crude) in the
domestic market is at 71.15 (P/Kg) and CNO (RBD is at 89.65 (P/Kg) as of June
20, 2014.19

19
PCA."Daily Price Monitor." June 20, 2014.

7
 2) Desiccated coconut (DCN) or shredded coconut meat is mainly used in pastries
to add texture and flavor. The current price of DCN is at 6,124.00 (P/Kg) as of
June 20, 2014.20

3) Copra meal or copra cake is dried meat from niyog where CNO is extracted
from. It is also used as animal feed. The current price of copra meal is at 10.65
(P/Kg) as of June 20, 2014.21

There are also non-traditional processed products which are gaining acceptance in the
market. Among the most popular ones are:

1) Coco sap sugar or coconut sugar is a sweetener derived from the sap of
coconut trees. It is considered a healthy alternative to common table sugar and
artificial sweeteners. It has gained popularity as a natural sweetener that’s safe
for diabetics for its low glycemic index. It also contains a selection of amino acids
and vitamins which are beneficial to the human body.

Table 8. Expected Initial Income from Coco Sugar Production

Expected Initial Income of Coco Sap Sugar

(PHP) per 30 trees per month production

Granulated Brown
Particulars
Sugar
Est. harvest (30 trees) 60 li
% Recovery 15
Production - 30 trees 270 kg
Sugested Selling Price P30/kilo
Gross Income 8,100
Material Cost 455
Processing Cost 1,687.5
Total Cost 2,142.5
Net Income 5,957.5
Return on Invest.(%) 278
Source: PCA. Coconut sap at the village level, Techno Guide Sheet No. 8, 2003

20Ibid.

21
Ibid.

8
2) Virgin coconut oil (VCO) is coconut oil extracted from fresh coconut meat or
from fresh coconut milk and is considered to be the purest form of coconut oil.
VCO has been praised for its health benefits. Some of its health benefits include
lowered cholesterol levels and reduced risk of heart disease and diabetes. It also
helps in weight loss, in healing wounds, and in boosting the immune system with
its lauric acid content.
Table 9 . Investment Cost in VCO Production

Estimated Investment Cost in VCO (in PHP based on 2009

prices)
a. Utensils and Equipments Cost
Cheese cloth (katsa) 50.00
Measuring cup/spoon for liquid 40.00
Ladle 35.00
Funnel 30.00
Makeshift Grater (kudkuran) 1,000.00
2 pcs Cooking Pans (Makeshift Double Boiler) 700.00
Mechanical Coconut Grater (optional) 16,000.00
Coconut Milk Press (optional) 17,000.00
Subtotal 34,855.00
b. Cost of Raw Material and Packaging Material:
Mature coconuts (big) 10.00
250 ml plastic bottle with cap 10.00
Bottle label 1.00
Cap seals (1000 pcs) 140.00
Cap seal blower or Heat Gun (optional) 2,000.00
Subtotal 2,161.00
Total Cost 37,016.00
Source: EntrePinoys ATBP. "Virgin Coconut Oil Commercial Production," http://bizfil.com/virgin-
coconut-oil-commercial-production/

3) Coconut water is the liquid found inside coconuts. It is extracted from young
nuts. It is usually sold by small traders in the streets and by small eateries.
Coconut water’s composition is said to be near identical to that of plasma. It was
used intravenously in the war and in emergency situations. Today, it is marketed
as a natural alternative to sports drinks due to its high electrolyte content and
exported with the use of tetra packs. It has grown in popularity partly through the
recommendation of popular individuals and through the endorsement of various
health, nutrition and lifestyle blogs and websites.

9
 Basic steps in processing coconut water.
1. Select young coconut with no cracks, holes, or other
defects.

2. Wash the nuts with tap water and later sanitize with
chlorinated water (1 tsp commercial chlorine bleach per liter
of water).
3. Cut nuts and collect coconut water in clean containers.
4. Scoop meat with spoon and wash with potable water to
remove fibers, testa and other dirt particles.
5. Mix buko meat and coconut water (optional).
6. Add 20% potable water to the mixture and sweeten with
sugar according to taste.
7. Pour in Polyethylene Terephthalate (PET) bottles and seal.
8. Store in coolers or refrigerate. This will last for 14 days or
more at 4 degrees Celsius.
Source: PCA. Young Coconut Water, FPDD Guide No. 1 — Series of 2014

4) Coconut flour is used as a substitute for most common flours used in bread and
cakes. It is obtained by drying coconut meat of all its juices. It has gained
popularity because it is high in fiber, protein, and contains lauric acid. Health
advocates and those suffering from ‘coeliac disease’ prefer it because it is
gluten-free.

Table 10. List of Equipment for the Production of Coconut Flour and VCO (500 Nuts per
Day Capacity)

Equipment Unit Cost

Grinder / Pulverizer 1 45,000.00
Spinner 1 45,000.00
Dryer 1 190,000.00
Expeller 1 120,000.00
Grater 1 7,000.00
Building
Land 100 sq m 500 / sq m 50,000.00
Building 60 sq m 2,500 / sq m 150,000.00
Total Cost 607,000.00
Source: PCA. "Production of Coconut flour and virgin coconut oil.”
www.pca.da.gov.ph/pdf/techno/flour_vco.pdf

5) Coco coir is the natural fiber extracted from coconut husks. The fiber has many
applications such as material for organic ropes, cushion for car seats, geotextile
for road construction, coir logs to prevent river bank erosion, and other
applications. In the process of coir extraction, coir dust, also known as peat, is

10
 produced. The peat can be used as fertilizer for immediate application. Some
entrepreneurs process the peat into peat blocks for export. The peat blocks are
used for urban gardening.

Coir Dust (Fertilizer) Application in Coconut Farms

Evenly distribute coir dust within 1.5 m radius of the coconut
palm.
Incorporate within topsoil (0-6 in.) the following amount of coir
dust/palm/year: 10 kg (in coastal areas); 15 kg (in inland areas).
Apply the recommended mineral fertilizer (ammonium sulfate)
once a year at the start of rainy season following the broadcast
and soil incorporation method within the 1.5 m radius of root
zone of each palm.
Source: PCA. "Utilization of Cocopeat in Coconut Production," Techno Guide
Sheet No. 10 Series of 2003

WHAT DO FARMERS NEED TO KNOW ABOUT COCONUT PRODUCTION?

On average, a coconut tree would yield around 35-36 nuts annually. A total of 100-110
trees can be planted on a one-hectare parcel of land which can produce 3,500 nuts. The
coconut tree is best suited in sandy soil but can adapt to different types of soil. It is also
best suited for warm and humid climates. Exposure to sunlight is also important and
needs to be considered by farmers who plan to undertake intercropping.22

There are two main types of coconut trees: tall and dwarf. The dwarf variety grows faster
but has a shorter life span. The PCA promotes tall and hybrid varieties of both dwarf and
tall coconut trees contingent on the soil characteristics of the farm. The PCA also
promotes the high-yielding ‘Galas Green Dwarf’ variety as an alternative for farmers.
This variety yields 70 nuts per year compared to the 35-45 nuts per year of most
common varieties. The other varieties promoted by the PCA are the ‘Tacunan Green
Dwarf’ and the ‘Genetically Multi-Ancestored Farmers’ Composite Variety’.

Salt is the most common input. It is the cheapest and best source of chlorine to increase
copra yield. This is important for the 40 coconut-producing provinces that are severely
chlorine deficient.23 Another type of input is the organic fertilizer, which is beneficial since
it reduces the cost of inputs in areas where it’s available.

Farmers have various options to enhance the productivity of coconut areas and increase
incomes through diversification of crops within the same farm.

1. Intercropping with Banana. Bananas can be intercropped with one to three

year old or older coconut trees. The basic climatic requirements are almost the

22
PCA. "The Light Levels under Coconut Canopy and their Practical Applications in Intercropping"
23
Magat, S. "Salt An Effective and Cheap Fertilizer for High Coconut Productivity," PCA, 2000.

11
 same. In fact, banana needs less water than coconut, a fast-growing plant, and
bears fruit in less than one year.24

Basic Information on Banana Intercropping

Land Preparation: After clearing the interspaces of coconut, mark the required
distance: 3 x 3 m for Lakatan and Latundan; 5 x 5 m for Cardaba/Saba.

Planting: Dig a hole depending on the size of planting materials. Plant corms in
slanting position with growing point on top. For suckers, plant in upright position and
cover with soil up to the collar and press gently.

Maintenance: Fertilize banana with the following fertilizers and rates under two options:
100% inorganic fertilizer (IF) or 75% inorganic + 25% organic fertilizer (OF).
Harvest: Harvest 10 to 15 months after planting or when fruits are full, plum, round,
and light green, and the angles of the fingers are rounded.
Source: PCA Techno Guide Sheet No. 12 Series of 2003

Table 11. Simple Cost and Return Analysis of Lakatan

Under Coconut Using Two Fertilizer Options

Item Option 1 Option 2

100% inorganic 75% Inorganic +25% organic
Copra yield (t/ha) 9.71 11.94
Lacatan yield (t/ha) 17.39 15.08
Combined gross return(PHP) 218,830.00 224,960.00
Combined total cost (PHP) 133,800.00 134,950.00
Combined net return (PHP) 85,030.00 90,010.00
BCR (for 3 years) 1.70 1.60
Source: PCA-DRC, BagoOshiro, Davao City, 1995-1998).
PCA Techno Guide Sheet No. 12 Series of 2003

2. Intercropping with Cacao. Cacao can be intercropped with coconut when the
trees are 25 years old and above. Cacao and coconut do not compete with each
other for soil resources except in dry areas.25

24
PCA."Coconut-Banana Intecropping," Techno Guide Sheet No. 12 Series of 2003.
25
Magat, S., and Secretaria, M. "Coconut-Cacao Cropping Model" PCA 2007.

12
 Basic Information on Cacao Intercropping
Cacao tree is best planted not closer than 2 meters from the base of coconut trees, at 3 m
between hills, and 3 m between rows.
Where there is limited land for cacao monocropping, the inter-spaces of coconut lands (with
8-15 meters of spacing of coconut palms) are suitable for several rows of cacao crop.

Climatic Needs:
Factor Coconut Cacao
Altitude (m above sea level) Less than 600 Less than 300
Temperature (oC) 2
-P* 1 2 18-32
Light >2000 sunshine Shade-tolerant crop
hours/year
Total annual rainfall (mm) 1500- 2500 (well 1,250-2,800(w/o any
distributed) drought exceeding 3
months
Typhoon frequency (%) < 20 < 20
Soil Requirements:
Soil Condition Coconut Cacao
Soil Depth (cm) >75 >1500
Drainage Moderate to well-drained Well-drained

Soil Acidity (pH) 5.5-7.5 4.5 - 7.0

Soil Texture Sandy, loamy, clayey Loamy, clayey (with good
(with good structure) structure)
Organic matter content Medium to High Medium to High
Major nutrients N, K, Cl, S, P, Ca, Mg, B a C K, CL N,

Source: Magat&Secretaria. "Coconut-Cacao Cropping Model" PCA 2007

A study conducted by Magat and Secretaria (2007) suggests that a coconut-cacao farm
with 135 coconut trees and 600 cacao trees can generate returns on Year 1 and a
combined and gradual increase in income of PHP 36,232 on Year 2, PHP 69,030 on
Year 3, PHP 93,541 on Year 4, and PHP 116,161 on Year 5.

3. Intercropping with Corn. Corn can be intercropped with coconut. The spaces
between rows of coconut trees can accommodate about six to nine rows of corn
depending on the planting distance.26

26
PCA."Coconut-Corn Intecropping," Techno Guide Sheet No. 11 Series of 2003.

13
 Basic Information on Corn Intercropping

Land Preparation: Plow the field once when soil moisture permits and harrow twice.
Make furrows at 0.75 m apart and 2 m away from the base of the coconut.

Planting: Basal fertilizer application - Apply fertilizers in furrows in three bags 14-14-
14 per ha and cover with a thin layer of soil before planting. Plant two seeds per hill
on furrows at a distance of 20 cm between hills or 5.0 hills per linear meter (about
30,000¬48,000 plts/ha). This should be thinned to one plant per hill two weeks after
germination.

Maintenance: Off-bar (plowshare away from furrows) on the 14th day after planting Commented [j1]: Is this really plowshare?
(DAP). Sidedress the remaining half of the fertilizer at two bags ammonium sulfate or
Commented [j2]: Is this really sidedress?
one bag urea around 5-6 cm away from the corn plants just before hilling-up.
Harvest: Harvest the ears at an appropriate time usually 95-100 DAP when husks are
already dried.
Source:PCA Techno Guide Sheet No. 11 Series of 2003

4. Intercropping with Gmelina arborea. Gmelina is a fast growing forest tree

planted to produce wood for light construction and crafts. It can be grown
alongside coconut trees with proper pruning.27

Gmelina Intercropping procedure

The bearing coconut trees are pruned from leaf 23 (with the oldest harvestable bunch
and below, maintaining 22 living leaf fronds every nut harvest).
Plant two rows of gmelina seedlings at 3 x 3 m in between two rows of coconut trees.
Fertilize gmelina plants with 14-14-14.
Prune the lateral branches of one to three year old gmelina trees below 3 m height to
promote straight and bigger trunks.
Harvest 25% of the total gmelina planting on the third year for banana props, fuel. Commented [j3]: Is this really props?
Harvest another 25% on the sixth year and the remaining 50% on the 10th year for
lumber (wood) and fuel purposes.
Source: PCA. "Coconut-GMelina cropping System," Techno Guide Sheet No. 14 Series of 2004.

A sample cash flow analysis of coconut-gmelina production suggests a 10-year net

benefit of PHP 11,101 on Year 1, PHP 9,892 on Year 2, PHP 37,949 on Year 3, PHP
9,436 on Year 4, a PHP 2,975 loss on Year 5, PHP 80,132 on Year 6, PHP 5,978 on
Year 7, PHP 10,232 on Year 8, PHP 11,548 on Year 9, and PHP 106,710 on Year 10
(PCA 2007). The income streams come from the sale of coconuts, coconut leaves, and
gmelina wood.

27
PCA."Coconut-GMelina cropping System," Techno Guide Sheet No. 14 Series of 2004.

14
 5. Intercropping with Moringa or malunggay. Dubbed as the “miracle tree”,
moringa can be intercropped with coconut at the right developmental stage,
usually when the coconut trees are seven years of age or older.28 The moringa
itself is a versatile crop that has emerging new uses ranging from health
capsules and drinks to mixes with vegetable-enriched noodles.

WHAT IS THE EXISTING POLICY ENVIRONMENT IN THE COCONUT

INDUSTRY?

The Philippine Coconut Authority (PCA) is the designated governmental body tasked to
look after the welfare of the coconut industry. It was created through Presidential Decree
No. 232 in 1973 and absorbed its predecessors like the Coconut Coordinating Council,
the Philippine Coconut Administration, and the Philippine Coconut Research Institute. It
is essentially under the Department of Agriculture (DA) but was recently transferred to
the Office of the President under the direct supervision of the Presidential Assistant for
Food Security and Agricultural Modernization. The PCA functions as a government
owned and controlled corporation (GOCC) which means that it has its own charter and
budget separate from the DA.

The PHILIPPINE COCONUT AUTHORITY is the sole government agency tasked to

develop the industry to its full potential in line with the new vision of a united, globally
competitive, and efficient coconut industry.

Mandate: To oversee the development of the coconut and other palm oil industry in
all its aspects and ensure that the coconut farmers become direct participants in, and
beneficiaries of, such development and growth. (PD 1468, Art. I, Sec. 2)

Mission: To promote the development of a globally competitive coconut and other

palm oil industry that would contribute to food security, improved income, and
enhanced participation of stakeholders.

Vision: PCA as an Entrepreneurial Development Authority.

The PCA has four main programs:

 Production Services-- include projects on coconut planting and replanting,
coconut rehabilitation, and maintenance of seed farms, institutional development,
and farm diversification.
 Market Development Services--revolve around activities to promote the
coconut industry.
 Research and Development --includes projects on varietal improvement, crop
protection, and product development.

28
Magatet. al. "Mineral Macro-Nutrients, Micro-Nutrients and Other Elements in Leaves of Malunggay Plant
(MoringaOleifera) Sampled in Some Locations in the Philippines," PCA, Technology-Advisory Notes, 2009.

15
  Regulatory Services--include the implementation of the coconut cutting act, the
registration of key products and stakeholders, and upholding quality standards.

The Philippine Development Plan 2011-2016 (PDP) highlights the government priorities
in the next five to six years. Under Chapter 4 on agriculture, Competitive & Sustainable
Agriculture & Fisheries Sector, the government recognizes the need to promote long-
term financing for long-gestating crops such as coconut similar to what the Philippines’
Southeast Asian neighbors have done 29 . This chapter also highlights the need to
strengthen agricultural exports such as coconut by funneling resources to it.

In Chapter 3 of the PDP termed as Competitive Industry &Services Sectors, the

government recognizes the impact and importance of the coconut industry and the need
to promote value-added products such as refined coco oil, coco biodiesel and oleo
chemicals to double the export of coconut products by 2016.30 The government will also
promote the use of green products such as coconut among micro, small, and medium
enterprises. This chapter also mentions a public-private-partnership (PPP) model in
promoting green products with coconut and other commodities.

The government has yet to approve the Integrated Coconut Industry and Poverty
Reduction Roadmap although it has been cited in the National Budget Memorandum No.
118 as part of the 2014 budget process.31 The government plans to allocate around PHP
11.2 billion in annual spending for the coconut industry up to 2016. 32 The government
also intends to use the coco levy fund as a source of financing for this roadmap, given
the 2012 Supreme Court decision which declared the coco levy as a public fund.

For 2014, the government has appropriated the amount of PHP 2.3 billion, which is
roughly 0.1% of the total PHP 2.2 trillion national budget. Historically, government
appropriation for the PCA has been minimal and below one percent (1%) of the national
budget. This is in contrast to the total DA budget for rice programs and projects
amounting to PHP 7 billion for 2014.

The top three priority allocations of the PCA are for coconut planting and replanting,
fertilization, and creation of agro-industrial hubs. The budget allocation leaves little room
for disaster risks such as in the case of Davao Oriental in the aftermath of Typhoon
Pablo in 2012, and Leyte and Samar in the aftermath of Typhoon Yolanda in 2013.

A number of laws and policies would have positively impacted on the coconut industry if
only these were properly enforced:

29PhilippineDevelopment Plan 2011-2016. “Chapter 4: Competitive & Sustainable Agriculture & Fisheries Sector” NEDA.
30PhilippineDevelopment Plan 2011-2016. “Chapter 3: Competitive Industry & Services Sectors” NEDA.
31TheCoconut Industry Roadmap was prepared by the National Anti-Poverty Commission on behalf of a technical working
group composed of other bodies of government: DA-PCA; DAR; DSWD; NCI; and Philhealth. It is part of the Aquino
Administration’s poverty reduction program.
32
NAPC."Poverty reduction roadmap of the Philippine Coconut Industry" 2011.

16
 a) The Agricultural and Fisheries Modernization Act (AFMA) or R.A. 8435 aims to
transform the agriculture sector into "one that is dynamic technologically
advanced and competitive, yet centered on human development, guided by
sound practices of sustainability and the principles of social justice.”33 The law,
however, has little impact on coconut farms since lands for coconut production
are not regarded as prime agricultural lands since most of these lands are not
irrigated. This has led to funding constraints and support for the coconut industry
remains minimal.

b) The Comprehensive Agrarian Reform Program (CARP) Law of 1988 aims for a
more equitable distribution and ownership of land which recognizes the rights of
farmers, farm workers, and landowners to empower and improve the quality of
their lives. This law may have social justice in mind but it has had an adverse
effect on the growth of the coconut industry. The stringent provisions of the law
have distorted the rural land markets and have driven away possible investors.
Because of this, there had been no replanting or intercropping in most
commercial estates since 1988. 34 In the past, some resorted to cutting down
coconut trees as an alternative source of income since investment in coconut
farms wasn’t a lucrative venture. Today the DAR has yet to distribute land under
its Land Acquisition and Distribution (LAD) program. The Samar provinces, which
have the largest portion of undistributed land, are predominantly coconut
plantations (30% or 262,524 ha).35

c) Republic Act No. 8048 or the Coconut Preservation Act of 1995 was passed into
law as a response to the rampant cutting of coconut trees. This regulates the
cutting of coconut trees through requirements and permits. It also stipulates that
there should be a sustainable and efficient replanting program since the industry
has significant impacts on the country’s economy. The law has been criticized for
being ineffective. The indiscriminate cutting of coconut trees continues although
recommendations on how to improve the law’s implementation have been
made. 36 The Philippine National Police have also made successful arrests of
illegal coconut loggers in the past decade. There are a number of provisions of
this law which were updated in 2013 through R.A. 10593.

d) The “Coco Levy Fund”. In the 1970s, several levies were imposed through laws
to fund government programs intended to support the coconut industry. These
programs were carefully designed such that the coconut farmers would be the
primary beneficiaries on paper. The benefits range from ownership of a bank that
presently accumulates property, credit extensions, subsidized coconut products,
scholarship and death benefits, free replanting of old coconut trees, and benefits
control of the milling sector through UNICOM.37

33Agricultureand Fisheries Modernization Act of 1997.Republic Act No. 8435.

34Dy, R.."The Philippine Coconut Industry: Performance, Issues and Recommendations," EPRA (2006).
35Relief Web International. “Rebuilding Coconut Production After Typhoon Yolanda,” 2014.
36Pabuayon I., et al. "The Philippines Regulatory Policy on Coconut Cutting: An Assessment Incorporating Environmental

Consideration," Department of Agricultural Economics, College of Economics and Management University of the
Philippines Los Banos (UPLB). J. ISSAAS Vol. 15, No. 2:93-106 (2009).
37
Dy, R. "The Philippine Coconut Industry: Performance, Issues and Recommendations," EPRA (2006).

17
 Laws enabling the collection of coconut levies
Republic Act (RA 6260) of 1971, known as the Coconut
Investment Act;
Presidential Decree (PD No. 276) of 1973, established a
Coconut Consumers Stabilization Fund (CCSF)
PD (582) of 1974, created the Coconut Industry Development
Fund (CIDF)
PD (1841) created the Coconut Industry Stabilization Fund
(CISF).

One may argue that the drafters of these laws and programs had reasonable intentions
at the onset; history, however, has shown that the personalities involved during that time
had questionable motives and objectives. Farmers were only able to partake of a small
piece of the otherwise enormous coconut levy pie. During this time a monopoly was
created since coconut mills and interlocking government directorates gained the lion’s
share of the profits and passed the burdens of the industry to the farmers.38 The “coco
levy” fund is considered public funds in nature but through legal and political
maneuverings, it was converted to private funds.39

The levies were finally ended in 1982 but the “coco levy fund scam” has tainted the
coconut industry for decades. The promise of help and support for the industry was
instead channeled to fill the pockets of unscrupulous people linked closely with the
former President. The legal tug of war on the coconut levy dragged on for at least two
decades, bringing down the country’s coconut industry with it.

In 2004 the Sandiganbayan made a decision that the funds were ill-gotten during the
time of the late dictator. The Supreme Court in 2012 affirmed the decision of the
Sandiganbayan and voted unanimously stating that the “coco levy” was imbued with
public interest. The San Miguel Corporation shares and other Coconut Industry
Investment Fund (CIIF) assets are estimated to be around PHP 100 B. Yet despite the
SC decision, it’s still not clear when and in what manner the funds will be spent for the
benefit of the coconut farmers.

WHAT ARE THE ISSUES AND CHALLENGES CONFRONTING THE

COCONUT INDUSTRY?

The Philippine coconut industry is facing serious challenges where the appropriateness,
seriousness, and quality of the response will determine the industry’s growth, survival
and sustainability:

38Faustino, J. "Facing the Challenges of the Philippine Coconut Industry: The Lifeblood of 4.4 Million Coconut Farmers
and Farm Workers," EPRA (2006).
39
Dy, R. "The Philippine Coconut Industry: Performance, Issues and Recommendations," EPRA (2006).

18
Climate Change and Disasters

The 2013 Climate Change and Environmental Risk Atlas of Maplecroft, an international
think tank, ranked the Philippines as second only to Bangladesh among the countries in
Asia to be "most at risk from the changing temperatures and weather systems. 40" In the
next decade, an overhaul will happen with the weather patterns of the country based on
the climate scenarios developed by PAGASA: wet days will become wetter, hot days
hotter, areas with usually dry weather will experience rain and vice versa.41

Because 68 out of the 79 provinces in the Philippines are coconut producing areas, the
industry needs support. A PCA official has blamed the erratic weather conditions with
the decline of production in Northern Mindanao as early as 2011 and the cause of the
major decline in coconut production in the region.42

The country has been ravaged by numerous disasters, both by climatic and tectonic
forces. The Philippines is exposed to various hazards because of its geographic
location. Being situated in the Pacific rim of fire, the country is no stranger to
earthquakes. This is further compounded by the fact that the Philippines is in the path of
Pacific typhoons averaging 20 per year. The names Ondoy, Pepeng, Pablo, and recently
Yolanda have been etched in the memories of Filipinos because of the destruction these
typhoons have brought upon the country.

Yolanda-hit areas are coconut producing regions leaving many coconut farmers
economically marginalized. The PCA confirms that around 33 million trees in seven
provinces (Quezon, Guimaras, Iloilo, Negros Occidental, Cebu, Eastern Samar and
Leyte) were damaged in varying degrees.43 It will take three to five years to rehabilitate
the coconut farms using fast-growing varieties. Leyte and Samar, provinces account for
15 percent of the 852,000 MT of coconut oil exported in 2012 but the full impact will be
felt in 2014. It is hoped that the decline in exports would not exceed 10 percent of the US
$ 1 B dollar worth of exports in 2012. 44 Preliminary data from the United Coconut
Association of the Philippines states that CNO exports fell 49 percent to 237,831 MT in
the January to April 2014 period, compared to 466,111 MT during the same period in
2013.45

There is an urgency to cut and move felled trees to prevent the spread of pests and
diseases and to hasten the rehabilitation process. Cadang-cadang disease, which is
lethal to coconut trees and the Brontispaa type of beetle are already spreading in the
Eastern Visayas region. The PCA has provided chainsaws for farmers to help in clearing
coconut areas in exchange for wages. The national government also promised to deliver
a long-term solution in assisting coconut farmers through the Reconstruction Assistance
on Yolanda (RAY) strategic plan. A total of PHP 361 billion has been promised for the

40Maplecroft. “Climate Change and Environmental Risk Atlas for 2013,” accessed February 25, 2014.
41PAGASA."Climate Change in the Philippines," MDGF 1656, 2011.
42Fiel,T. "Climate change brought coconut harvest down, say execs," Philippine Daily Inquirer, July 28, 2011.
43Relief Web international. “Rebuilding Coconut Production After Typhoon Yolanda,” 2014.
44 Raghu, A., and dela Cruz, E. (2013). "Why Philippine coconut crop damage is causing supply worries," ABSCBN

News.com, December 19, 2013.

45
Diega, A. (2014). "Coco-oil export down by half as sector reels from ‘Yolanda’," Business Mirror, January 4, 2014.

19
reconstruction of Yolanda-hit areas, PHP 18.7 billion of which is earmarked for the
agriculture sector. The specific breakdown of the fund is still not detailed and funding will
be sourced from donor communities.46 The government also intends to disburse the fund
in four years, with an annual release of PHP 100 million. It can be surmised that local
disaster risk reduction and management plans for Yolanda-hit areas were either non-
existent or inadequate to mitigate the impact of the typhoon.

Infestation

Aside from climatic risks and threats, there is also a Coconut Scale Insect (CSI) invasion
observed since 2010. The Aspidiotus Destructor is yellowish in color and injects a
chemical on the leaves of coconut trees. This disintegrates the leaves' chlorophyll and
interferes with the coconut’s ability for photosynthesis.47The CSI is spreading in Region
4A CALABARZON and Basilan. This problem was largely ignored and previous
measures implemented to eradicate the insect were futile.
The recent overhaul of political leadership in the agriculture sector indicates the gravity
of the problem. The new food security and agricultural modernization chief, Secretary
Francis Pangilinan has vowed to stop the spread of the bug and to eradicate it
completely. Executive Order No. 169, mandates the activation of emergency measures
to control and manage the infestation. Equipped with a PHP 750 M budget for a six
month program, dubbed the “Sama-samang Aksyon ng Gobyerno, Industriya, at
Pamayanan sa Malawakang Pagsugpo ng Pesteng Cocolisap" (SAGIP), Sec. Pangilinan
intends to contain the spread of the insects.48 Though the budget seems small for such a
huge task, it’s a step forward and substantial compared to the previous budget
allocations promised by the PCA.

Institutional fragmentation and policy bias

Despite being a major contributor to agricultural exports, the coconut industry is in the
periphery of government policy and institutional support. The prioritization for rice and
food self-sufficiency has overshadowed the coconut industry’s need for years. The
promise of great financial returns from the “coco levy” has also contributed to the virtual
invisibility of the coconut industry in the annual budget. Coconut farmers are among the
poorest in the country and there is a prevailing need to channel more funds for their
source of livelihood. Rural poverty incidence is highest among coconut farmers at
around 60%. Four of the top 10 provinces with the highest number of poor families are
coconut-producing provinces.49

This bias has contributed to the other persisting issues within the coconut industry such
as the increasing population of senile coconut trees. It is estimated that 30% of coconut-

46Official
Gazette. "P361 billion needed for Yolanda recovery, reconstruction" December 18, 2013.
47Larano, C. (2014). "Insect Attacks Philippine Coconuts: The Aspidiotus Destructor Thought to Come From Indonesia,"
The Wall Street Journal, June 9, 2014.
48Reganit, C. (2014). "KontraCocolisap: Fightring coconut scale insect infestation of 1.8 million trees," InterAksyon.com,

June 22, 2014.

49
National Anti-Poverty Commission."Poverty reduction roadmap of the Philippine Coconut Industry" 2011.

20
bearing trees are senile or over 60 years old.50 Further compounding this problem is the
prevalence of low-yielding varieties of coconut trees around the country. Despite efforts
by the PCA for replanting, it would take a nationwide effort to address this problem.

Inadequate provision for risks and losses

The inadequacy of crop insurance has been a perennial constraint for coconut farmers.
Related to this is the absence of a clear roadmap for the coconut industry’s
development, one that is sensitive to the risks of climate change, disasters, and
infestation.

The PCA and Philippine Crop Insurance Corporation (PCIC) have a joint memorandum
aiming to create funding mechanisms for micro-finance oriented towards small coconut
farmers. To date 500,000 farmers are insured with PCIC out of the estimate 3 million
farmers and farm workers. The current insurance policy is framed with consideration for
coconut as a high value crop.

Reversing stagnation

The Philippine coconut industry has been on a steady decline with 46.63 million of
coconut trees (14% of total) considered to be senile. 51 Output production has been
almost stagnant with an average growth rate of two percent (2%).52 Even though the
PCA has exerted efforts towards planting new trees, the scope of their ongoing program
is just too small. This is also compounded by the fact that areas for coconut production
are in decline. Land conversion and the rampant cutting of coconut trees despite the
passage of the Coconut Preservation Act have led to the decline of coconut
plantations.53

Land conversion has literally changed the landscape of coconut cultivation areas.
Although accurate figures are not yet available, substantial portions of coconut areas
have been transformed due to infrastructure development, real estate expansion, and
sports and tourism.54 There are also areas where coconut production has been switched
for seemingly more lucrative crops, especially for disaster-hit regions. 55 It is more
lucrative to grow rice, vegetables, and other crops since the gestation period for these
are relatively shorter compared to the several years it takes for the coconut to yield nuts.

50
Faustino, J. "Facing the Challenges of the Philippine Coconut Industry: The Lifeblood of 4.4 Million Coconut Farmers
and Farm Workers," EPRA (2006).
51National Anti-Poverty Commission."Poverty reduction roadmap of the Philippine Coconut Industry" 2011.
52Ibid.
53Faustino, J. "Facing the Challenges of the Philippine Coconut Industry: The Lifeblood of 4.4 Million Coconut Farmers

and Farm Workers," EPRA (2006).

54
Ibid.
55
Dy, R. "The Philippine Coconut Industry: Performance, Issues and Recommendations," EPRA (2006).

21
Improving value chain coordination

There is a huge gap between the supply base and manufacturing chain. Oil mills,
refineries, and other facilities are operating below capacity due to the lack of coconuts. A
SWOT analysis prepared by Dr. Rolando Dy (2006) cites gaps in the marketing system.
The gaps are mainly due to the following: poor infrastructure, low productivity due to
senility of trees, low capacity of mills due to the shortage of raw materials, and weak
institutional support from government due to frequent leadership changes in the PCA
and the protracted debate over the coco levy funds.

22
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