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Author:

Coconuts

Small-scale Review of Coconuts

Date: October 2008

Center for Agricultural Policy

Prosperity Initiative


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Coconuts

Small-scale Review of Coconuts

Short analysis of the coconut sector as regards demand,

competitiveness, impact and opportunities with the aim of helping to

eradicate poverty in Vietnam through market forces

October 2008

Supported by: The Australian Agency for International Development (AusAID); The Swiss Agency for

Development and Cooperation (SDC), Oxfam Hong Kong (OHK) and Oxfam America (OA).

Prepared by the Center for Agricultural Policy with Prosperity Initiative


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Chapter 1 Introduction

1Introduction

3Competi-tiveness

4Impact

6NextSteps

2Demand

5Opport-unities

1Introd-uction

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PI / CAP approach to sector analysis

Overview of the coconut sector

Segments and study focus


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This is one of a series of small-scale studies carried out by the Center forAgricultural Policy* supported by Prosperity Initiative to identify opportunities

to assist in eradicating poverty in rural Vietnam through market forces

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

* The Center for Agricultural Policy (CAP) is a semi-autonomous center within the Institute of Policy and Strategy for Agricultural andRural Development (IPSARD) within the Ministry of Agriculture and Rural Development (MARD) of the Government of Viet Nam

While small in scope, these studies seeks to provide provisional answers to several questions:

Is there likely to be sufficient future demand, i.e. a domestic or international market with thewillingness and ability to spend on the relevant commodity?

Are there international benchmarks to support the case for industry investment in Vietnam asagainst other countries?

What other opportunities do there appear to be to enhance the competitiveness of the industry infavour of the target group of poorer people?

How is development of the industry likely to benefit poor people in the rural areas of Vietnam?

Why should a target poor group choose to make their livelihood from the commodity rather than anavailable alternative?

Does the sector look sufficiently promising in terms of potential size and impact on rural poverty tomerit more in-depth review/feasibility?

If the sector presents opportunities for a reduction in poverty, are CAP and PI best placed to take

this further or how should it otherwise be handled?


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Achieving poverty reduction at scale through market forces requires anassessment of the demand and competitiveness in the sector with potential tohave a positive impact on household incomes

Distribution of potential benefits

Pro-poor economic impact

Environmental impact

Social implications

Opportunities

Competi-tiveness

Impact Demand

Understanding market dynamics

Supply, demand, stocks and prices

Market outlook

Scale of production supportable byfuture demand

Benchmarking and analysis ofcompetitiveness

Current costs of production alongthe supply chain

Potential productivity gains, e.g.from technology, skills, sector-enabling environment, etc.

Potential for market access andincreased market share

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The Coconut Palm is a perennial plant(lasting about 40 60 years), and can begrown from its seed.

There are almost 4,000 species distributedamong 200 genera of coconuts in the world.

The varieties of coconuts are divided into 2main kinds: Tall and Dwarf.

Coconuts are adaptable to many soil types,and can be grown inland provided there isadequate drainage and pH between 5.0 and8.0, temperatures of 70o 80oF and highhumidity.

The time between planting and harvesting ofa coconut varies from 3 to 5 years.Coconuts can be harvested continuouslyuntil the tree grows old and dies

Several food uses or products exist forcoconut, such as copra, oil, and water.They are said to be very good for the healthand contain many vitamins such as: A, B1,B2, C

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Coconut description


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Uses of coconuts

The white, fleshy part ofthe seed is edible andused fresh or dry

Coconut water is usedas a refreshing drink and

is also used in isotonicsports drinks

Fresh Coconut Processed coconut

Copra: the dried endospermor meat of coconut,commonly seen in cakes andcandies.

Desiccated coconut: is the

dried, white, particulate orshredded food productmanufactured from freshlypeeled coconut kernels. Itsused in food (preserve, icecream )

Coconut oil: is extracted bypassing shredded and heatedcopra through very powerfulpresses. Coconut oil is usedin cooking, manufacturing,cosmetic and skin treatment

Others

The coir: is used in ropes,mats, brushes, caulking boats

The leaves: are usedmaterials for baskets androofing thatch

Palmwood: is applied in theproduction of furniture,handicraft and constuction

The husk and shells can beused for fuel and are a good

source of charcoal

The roots: are used as a dye,a mouthwash, and a medicinefor dysentery

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The coconut can be divided into three main groups: Fresh coconut, Processedcoconut and Others. Nearly all parts of the coconut palm and nut are useful soit can have significant economic value


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Secondary and by-products are those which require one step of processingfrom the primary product (such as copra, oil coconut and desiccated coconut)to reach the desired end product. Examples include:

Coconut milk is a sweet, milky white cooking base derived from themeat of a mature coconut

Coconut cream is an infusion of shredded coconut and water.Coconut cream may also be made with milk instead of water to obtaina richer product

Coconut candy is the candy made from coconut milk and coconutcream (for example as produced in Ben Tre Province, Vietnam)

Coconut water is a natural product for drinking

Coconut oil is commonly used in cooking and many other waysincluding as a medicine and in cosmetics, or as a direct replacementfor diesel fuel and livestock feed.

Virgin coconut oil: Virgin coconut oil is derived from fresh coconuts.Its very natural and used for food.

Cooking oil coconut

Coconut milk

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This study starts with a brief outline of global developments in the coconut sector, and thenexamines in more detail what is happening in the coconut sector in Vietnam.

It focuses on some of the main coconut-based products, namely:- Coconuts

- Copra- Coconut oil and copra meal- Virgin coconut oil- Desiccated coconut- Other utilizations

1Introd-uction

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Copra Coconut oil Virgin coconut oil Furniture


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Overall global demand for coconuts

* Some major coconut products

Copra

Coconut oil (CNO) and copra meal

Virgin coconut oil (VCO)

Desiccated coconut (DC)

Other utilizations

Chapter 2 Demand

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The total global area under coconut cultivation was stable at around 12 millionhectares during the period 1998 2006

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Source: Coconut statistical yearbook 2006, APCC

About 87% of coconut lands are in the member countries of the Asian and Pacific CoconutCommunity (APCC). Indonesia and the Philippines account for 32.4% and 27.5% of theworld coconut cultivation area.

11.9 11.7 11.7 11.812.1 12.1 12.1 12.2 11.8

5

6

7

8

9

10

11

12

13

1998 1999 2000 2001 2002 2003 2004 2005 2006

World coconut area in mn ha


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42.5 40.9 43.046.3 47.4

49.1 48.7 50.7 49.8 50.451.8 52.2 52.9 54.3 53.4

56.0

0

10

20

30

40

50

60

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Million tons

World consumption

World consumption of coconuts increased from 42.54 million tons in 1990 toover 56 million tons in 2005

Source: FAOSTAT

CAGR:

1.85%

Most of the world coconut production is consumed in the country of production (domesticconsumption), and the quantity of imports and exports is insignificant.

The Compound Annual Growth Rate (CAGR) of world coconut production and consumption since1990 are the same at 1.85%.

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0

10,000

20,000

30,000

40,000

50,000

60,000

1990 1994 1998 2002 2005

Others

Africa

Oceania

Europe

CentralAmerica

Latin America& Caribbean

South Asia

South EastAsia

Coconut consumption in 2005 was highest in Southeast Asia, followed bySouth Asia and the Latin America & Caribbean regions

1Introd-uction

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Source: FAOSTAT

3.17-0.11%

0.757.97%

1001.85 %Globalconsumption

65.422.14%

18.690.87%

7.503.57%

0.43-10.20%

0.062.18%

3.970.59%

Share in2005 (%)

CAGR(1990 - 2005)

Regions

Coconut consumption by region in 1,000 tons


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The main factors determining this increase in consumption were populationand per capita consumption. These had differing impacts across differentregions between 1995 and 2005

The main exception to the general increase in per capita consumption of coconuts has been Central America, where theCAGR was negative, with consumption decreasing to 242 tons in 2005 from 1,340 tons in 1995 for unclear reasons

Source: Calculated from FAOSTAT and World Bank data

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1.23

1.45

1.49

1.39

2.34

2.72

-11.17

-2.50

1.73

0.03

1.08

-0.20

2.16

-0.56

0.88

1.08

-12 -10 -8 -6 -4 -2 0 2 4 6

%

CAGR population CAGR consumption per capita

Africa

Oceania

Europe

Central America

Latin America& Caribbean

South Asia

South East Asia

World


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The top 10 coconut-consuming countries account for some 90% of worldconsumption. The 3 countries with the highest consumption are Indonesia,the Philippines and India, but Brazil and China have the highest growth rates

Top ten coconut consumption countries

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

19901992

19941996

19982000

20022004

1,000 tonsIndonesia

Philippines

India

Brazil

Thailand

Viet Nam

Sri Lanka

Papua New

Guinea

Malaysia

China

100

0.69

1.04

1.40

1.49

1.59

3.23

5.50

16.81

26.14

32.08

Share in2005 (%)

8.48

1.85World

-3.98

1.42

- 5.25

0.05

1.70

13.33

1.86

2.00

2.47

CAGR(%)

Country

Source: USDA

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Top ten coconut consumption countries

74.3

16.0

114.6

149.8

48.2

16.7

43.2

178.1

10.33.9

24.1

0.1

178.3

82.5

8.7

28.5

10.8

134.8

23.3

0.30

20

40

60

80

100

120

140

160

180

200

Indon

esia

P

hilipp

ines

India

Braz

il

Thail

and

Viet

Nam

SriL

anka

PNew

Guine

a

Malay

siaCh

ina

Kg per capita 1995 2005

The Philippines has the highest coconut consumption per capita of 178.34 kgin 2005

Although India and China are both in the top ten coconut-consuming countries, this reflects the sizes oftheir populations. Their per capita coconut consumption is relatively low at 8.7 kg and 0.3 kg respectively

Source: USDANote: It is understood that these figures include both coconuts consumed by the

countrys population and coconuts used for processing and subsequently exported

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1.05%

0.01%

-3.79%

-9.29%

-1.05%

-7.3%

15.7%-1.69%

3.71%

7.45%

CAGR(1995 2005)


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Copra




Other utilizations

Chapter 2 Demand

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0

1000

2000

3000

4000

5000

6000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

0

100

200

300

400

500

600

Consumption

Price (Phil/Indo, CIF EU ports)

Source: USDA, UNCTAD

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Global copra domestic consumption has grown at 0.67% p.a. over the last 15years and in 2006 totaled 5.264 million tonnes

Copra is materialfor extracting oilso most copra isconsumed inproducingcountries as partof a primary

process

In general, copraconsumptionwas quite stablefrom 1990 2006although therewere fluctuationsin prices.

Volume

In thousands MTPrice

US $ per MT

CAGR:

0.67%

Total annual domestic consumption of copra in 1990 2006


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5392 5264

128

In thousand MT

International trade in copra is quite small since major coconut-growingcountries process their own production.

Total supply ExportDomestic

consumption

Total supply, export & dom. consumption in 2006

0

50

100

150

200

250

300

350

400

450

1990 1992 1994 1996 1998 2000 2002 2004 2006

In thousand MT

Total exported volume of copra*

1Introd-uction

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Source: USDA* Note: The reasons for the large decline in copra exports in 2000 have not been fully explored as part of this study


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The top ten copra-consuming countries accounted for 96 % of total globalconsumption in 2006. Vietnam, India, and Mexico had the highest CAGR forcopra consumption in the period 1990 2006

Top ten copra consumption countries

0

500

1000

1500

2000

2500

3000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

1,000 MT

Philippines

Indonesia

India

Vietnam

Mexico

Papua NewGuinea

Thailand

Malaysia

Mozambique

Sri Lanka -5.510.84

100

0.89

1.02

1.32

1.77

3.91

4.32

13.36

24.99

43.95

Share in2005 (%)

1.14World

0.63

0.88

0.57

1.87

3.81

4.79

4.27

0.35

1.49

CAGR1990 - 2005

(%)Country

Source: USDA

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The relationship between copra price and domestic demand in the Philippines(the highest consuming country) is unclear. From 1995-2006 the copra pricefluctuated but increased overall by a CAGR of 3.9%, while consumptionincreased more slowly at 0.8%

Impact of FOB copra price on demand in Philippines

0

500

1000

1500

2000

2500

3000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

0

5000

10000

15000

20000

25000

Copra consumption Price (P/MT, FOB)

In recent years,

some coconutgrowing countrieshave begun toimport copra. ThePhilippines

routinely importscopra from PapuaNew Guinea andfrom the SolomonIslands tomaintainthroughput in theircrushing plants.

Source: USDA , PCA

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1,000 MT


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Copra




Other utilizations

Chapter 2 Demand

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2840 2719 2667 28193172 3056

3360 3117 2934 29073385 3194 3172 3211 3334

3464 3485

16711484 1591

1602

16901649

18131730

13641769

1942

1620 1743 16601774 1701 1568

0

1000

2000

3000

4000

5000

6000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Coconut oil Copra meal

Global CNO consumption increased from 2.840 million tonnes in 1990 to 3.485million tonnes in 2006 an average growth rate of 1.29% p.a., while copra mealconsumption decreased from 1.671 to 1.563 million tonnes

Source: USDANote: Coconut oil and copra meal are considered together because they are products of the same extraction process

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CAGR

:

+1.29

%

CAGR:-0.4%

Global dom. Consumption of coconut oil & copra meal

In thousand MT


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The importance of CNO in the total vegetable oil market has been declining: in2007 CNO accounted for only a 3.7% share of this market, and only 1.6% of thetotal increase in vegetable oil consumption of 42 million tonnes during theperiod 1998-2006

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1998 1999 2000 2001 2002 2003 2004 2005 2006

SOYBEAN PALM

SUNFLOWERSEED RAPESEED

COTTONSEED PEANUT

COCONUT OLIVE

PALM KERNEL

Palm62.4%

Peanut

0.3%

Coconut

1.6%Olive

1.2%Palm

Kernel

5.9%

Cottonseed

3.9%

Rapeseseed

19.7%

Sunflower

seed

5.0%

Source: USDA

Global consumption of main oils in thousand MT Increase consumption between 1998 - 2006

Total increase = 42,145 thousand MT

Share of increase in percentage

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CNO and its nearest substitute palm kernel oil typically trade at a discountcompared to other oils. There has been a slight downward trend in CNO pricesover the last 3 decades, although all oils have experienced considerable price

volatility driven largely by supply fluctuations

0

200

400

600

800

1,000

1,200

1,400

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Crude palm oil Palm Kernel Oil Soyabean Oil

Sunflower Oil Rapeseed Oil Coconut Oil

Vegetable oil prices, 1977 - 2005

Price: CIF Rotterdam in current US$ per ton

Source: Oil World

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871 943998

12281479

1810

20541751

1826

1881

159175

185

125

118

0

500

1000

1500

2000

2500

3000

3500

4000

1990 1994 1998 2002 2006

Feed WasteDom. Cons.

Food UseDom. Cons.

IndustrialDom. Cons. 42.44%3.36%

53.97%0.24%

3.59%-1.49%

Share in2006

CAGR90 06

Source: USDA

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Thousand MT

CNO is used for industry, food use and feed waste. Industrial use is increasingthe fastest at 3.4% p.a., while food use is quite stable but has the biggest sharein CNO consumption (54% in 2006). Feed waste is a small (3.6% in 2006) and

decreasing (-1.5% p.a.) part of the market

Recently, demand for CNO hasbeen driven not only by fooduses but also by the

oleochemical and biofuelindustries. This demand isprimary based on the chemicalproperties of coconut oil.


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Over the last decade, coconut usage for industrial purpose has remained quiteflat while its counterpart palm kernel oil has been on a rising trend

Source: USDA

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0

1000

2000

3000

4000

5000

6000

7000

8000

9000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Oil, Coconut

Oil, Cottonseed

Oil, Olive

Oil, Palm

Oil, Palm Kernel

Oil, Peanut

Oil, Rapeseed

Oil, Soybean

Oil, Soybean (Local)

Oil, Sunflowerseed

CAGR98 07

Sharein 2007

4.54% 6.04%

-0.43% 0.21%

12.65% 33.25%

7.34% 12.64%

21.10% 0.11%

21.72% 20.65%

30.74% 17.93%

7.55% 0.94%

6.43% 2.45%

24.87% 5.78%

Industrial domestic consumption of vegetable oil in 000 MT


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In the oleochemical industry, CNO faces high competition from palm kerneloil which has similar ingredients structure and is also a main source of lauricfatty acid (C12) which is said to have health benefits

The palm tree also has a competitive advantage over the coconut tree as fruits from palmoil produce two distinctive oils: Palm oil provides mainly C16 and C18 oil and Palm kerneloil provides C12 and C14 oil.

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Source: Salmiah Ahmad, 2000


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Asia & Pacific is the biggest consuming region of CNO accounting for over40% in 2006 with a growth rate of 10.7% p.a. in 1998 2006

0

500

1000

1500

2000

2500

3000

3500

4000

1998 1999 2000 2001 2002 2003 2004 2005 2006

Africa

America

Europe

Asia &Pacific

CNO consumption by region

In thousand MT

CAGR:10.68%

CAGR:

- 1.3%

CAGR:- 2.06%

CAGR:-0.64 %

In 2006 the Asia &Pacific Region

gained over 40% ofthe total marketshare of CNOconsumption

Consumption ofcoconut oil in Africa,America and Europedecreased from 1998to 2006 (with CAGRsof -1.3%, -2.06 and -

0.64% respectively.

Source: Coconut Statistical yearbook 2006, APCC

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0

500

1000

1500

2000

2500

3000

3500

1990 1994 1998 2002 2006

Japan

Russia

Mexico

Vietnam

China

Indonesia

United States

Philippines

India

EU-27

In consumption, EU27 has maintained its position as the biggest consumer ofCNO followed by some Asia/Pacific countries and USA, but the highest growthrates have been in Russia, Vietnam, and China

-1.131.72

22.28*3.44

2.34.42

4.824.39

12.573.82

-4.18.6

0.75*22.01

3.913.45

2.5514.95

0.8613.4

CountryShare in2006 (%)

CAGR(19902006)

(%)

Source: USDA, CAGR of EU 27 (1999 2006) & Russia (1998 2006)* Note: EU figures for 1990, 1994 and 1998 not obtainable owing to problems with aggregating data from various European countries

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Top 10 countries of CNO consumption in 000 MT


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EU is also the largest destination for CNO imports, accounting for 1.043 milliontonnes in 2006 or just over 46% of global imports, although its recent growthrate is slower than other regions

994.9 1,042.7

635.0 524.4

249.0

628.7

10.3

30.7

18.9

16.9

0

500

1000

1500

2000

2500

1998 2006

Pacific

Africa

Asia

America

EU 46.86%

23.57%

28.26%

0.46%

0.85%

2006Share

1.82% Total

0.59%

-2.36%

12.27%

-12.75%

1.45%

CAGR98-06

1,926.5

Imports of coconut oil in thousand MT

2,225.0


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Th t 12 i ti t i t f 86% f t t l CNO i t It i th


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The top 12 importing countries account for 86% of total CNO imports. It is thesecountries which have been driving growth in imports although the volumeimported by the two largest countries (USA and Germany) has been falling

Imports volume in selected countries in thousand MT

588.1493.9

351.4

326.0

240.8

284.2

184.0

166.217.3

91.072.8

39.1

56.148.9

29.772.3

39.133.3

63.6

72.1

62.0

43.1

57.2

10.3

0

200

400

600

800

1000

1200

1400

1600

1800

2000

1998 2006

Singapore

Korea

Spain

Italy

Japan

Begium - Lux

Rusia

China

Malaysia

Netherlands

Germany

USA

39

17

-10

14

-94

-25

43

154

94

74

34

30

Additional in thousand MT 1998 2006


1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

In some key CNO consuming countries price appears to have a relatively


36/144

34supported by

In some key CNO consuming countries, price appears to have a relativelystrong impact on demand

0

0.5

1

1.5

2

2.5

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

0

0.2

0.4

0.6

0.8

1Cons um ption per capita Dom es tic price

Source: http://pca.da.gov.ph/sstories

0

0.5

1

1.5

2

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

0

0.2

0.4

0.6

0.8Consumption per capita Domestic price

0

2

4

6

8

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

0

10

20

30

40

50

Consumption per capita Domestic pr ice

0.23 %-0.73%USA

2.78 %-0.90 %EU27

0.35%2.63 %Philippines

CAGR of cons.per capita

CAGR ofPrice

Country/Region

In selected importing andconsuming countries/regions, theprice of coconut oil appears to beinversely related to consumption,i.e. when the price goes up,consumption of coconut oil quicklygoes down. However, this needs tobe reviewed in more depth beforeclear conclusions can be drawn

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

Kg/capita P/Kg

Philippines

USA

Kg/capita

USA/Kg

EU 27

Kg/capita

USA/Kg

Cons mption of CNO and copra in Vietnam gre rapidl in the 1990s b t has


37/144

35supported by

Consumption of CNO and copra in Vietnam grew rapidly in the 1990s, but hastailed off over the last few years while consumption of coconuts has dropped

Source: FAOSTAT, USDANote: The figures for production and imports from APCC and USDA are different

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

0

200

400

600

800

1000

1200

1400

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

1000 tons

0

50

100

150

200

250

300

1000 MT

Coconuts (1000 tons) Copra (1000 MT) Coconut oil (1000 MT)

CAGR:

5.11%

CAGR:

4.79%

CAGR:

0.05%


38/144

36supported by

1Introduction

3Competi-tiveness

4Impact

6NextSteps

2Demand

5Opport-unities



Copra




Other utilizations

Chapter 2 Demand

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

CO


39/144

37supported by


What is VCO?VCOis produced using fresh coconut kernel.

The main difference between VCO and coconut oil is thesource:

- Coconut oil comes from copra. The oil derived from copra mustbe refined, bleached and deodorized to be fit for humanconsumption.

- VCO is produced from fresh coconuts. There is no need for

refining, bleaching or deodorizing of VCO.

Major uses of VCO:- As a hair conditioner- As body oil or moisturizing lotion- As carrier oil for aromatherapy and massage oils- As a functional food- As a cooking oil

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

The Philippines is a major producer of VCO largely for domestic consumption;


40/144

38supported by

The Philippines is a major producer of VCO, largely for domestic consumption;other producers include Samoa, Indonesia and Thailand

1,612,323

553,500

406,580

91,618

19,810

ExportValue (USD)

0.13

0.06

0.14

0.10

0.09

(%) Export

363.525

299,823

82,987

18,980

2,006

Localconsumption

(MT)

1772004

1132003

19.12002

1.82001

4752005

Export (MT)Quantity

Production of VCO in the Philippines has increased dramatically. It is largelyconsumed domestically

Although exports account for less than 1% of total use, they increased very rapidlywith a CAGR of 300% from 2001 to 2005.

Source: PCA-MDD

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

Philippines VCO Production and Export

United States is the largest VCO consumption country and imports 94% of


41/144

39supported by

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

United States is the largest VCO consumption country and imports 94% ofVCO exports from the Philippines. The EU and other countries in Asia/Pacifichave become new destinations for Philippines VCO in recent years

2.9514Asia

93.90446USA2.5312EU

100.00475Total0.623Others

2005Share in2005 (%)

Country

Market demand ofPhilippines VCO

Price: VCO retails for between USD3.00-5.00 per litre Philippines VCO export price has been averaging


42/144

40supported by

1Introduction

3Competi-tiveness

4Impact

6NextSteps

2Demand

5Opport-unities



Copra




Other utilizations

Chapter 2 Demand

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

Global consumption of DC grew at 1.54% p.a. in the period 1998 2006, and


43/144

41supported by

Global consumption of DC grew at 1.54% p.a. in the period 1998 2006, andtotal consumption in 2006 was 182,000 tonnes

161 162

185

150163

141156 161

182

1031

1148

791

701

999

842878

1051

915

0

20

40

60

80

100

120

140

160

180

200

1998 1999 2000 2001 2002 2003 2004 2005 2006

0

200

400

600

800

1000

1200

1400Consumption Price

Global DC consumption in thousand MT


CAGR:

%1.54%

Price: FOB Sri Lanka in US$ per MT

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

Main reasons forincrease in DC:

Because about 60 80% of global DCproduction is used inthe bakery andconfectioneryindustries, global DCconsumption dependson bakery demand in

the industries and theirassociated food safetyrequirements

DC prices havereduce lightly from1998 to 2006 affectingthe increase in DCdemand.

Europe is the biggest consuming region of DC, followed by America and Asia


44/144

42supported by

p gg g g , y& Pacific. In 2006 the EUs consumption of 88,558 tonnes accounted for 48.7%of the total with a CAGR of over 3.6% p.a. from 1998 to 2006

Asia &

Pacific

20.4%

America27.9%

EU

48.7%

Africa

3.1%

EU, 3.6%

America,

0.1%

Africa,

- 9.7%

Asia &

Pacific,

2.0%

-15 -10 -5 0 5

Share of DC consumption in 2006 CAGR of DC consumption from 1998 to 2006

1.54

In Europe: The U.K. consumed the highest quantity of DC, namely 12,884 tonnes in 2006 whichrepresented 14.5% of Europes total consumption of 88,558 tonnes and 7% of global consumption

In the Americas: the USA consumed 36,141tonnes in 2006, accounting for 71.4% of the Americas total and19.9% of global consumption


1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

The top ten DC consuming countries accounted for ~73% of the total in 2006.


45/144

43supported by

Belgium, Netherlands and Turkey had the highest CAGR from 1998 2006(although these figures include transshipments)


38.96 37.57 36.14

4.04 6.516.02

10.47 9.16

15.346.18 7.29

14.93

18.08 11.2

12.68

7.58

5.15

8.65

5.05

8.13

7.62

7.91

5.02

7.49

1.38

1.26

7.14

6.3

2.84

6.21

0

20

40

60

80

100

120

140

1998 2002 2006

France

Turkey

Poland

Canada

Australia

UK

Netherlands

Germany

Belgium

USA

-0.18

22.86

-0.68

5.28

1.68

-4.34

11.67

4.89

18.8

-0.93

DC consumption in selected countries in thousand MT CAGR 1998 2006 in percent

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

The volume of imported DC has increased from 168,580 tonnes in 1990 to


46/144

44supported by

34.59 36.61 33.2446.46

76.3126.9

39.9442.49

51.7

57.67

43.91

46.92 44.73

46.03

45.77

11.55

18.1335.38

26.69

31.77

22.11

23.92

21.77

20.69

17.46

4.75

13.759.7

11.08

10.99

12.2515.66

12.53

12.07

14.638.5

10.16

13.39

19.29

10.1

0

50

100

150

200

250

300

1990 1994 1998 2002 2005

Oceania

Africa

Other America

North Europe

Other Europe

North America

West Europe

Asia

Asia

28%

North

America

17%

Other

America

5%

Africa

5%

Oceania

4%

West EU

22%

Others

EU

12%

North EU

7%

Source: FAOSTAT, Overview the desiccated coconut sector - ACIAR

p265,380 tonnes in 2005 with a CAGR of 3.08%

The main importers, the USA andEU, account for 57.5% of the total.In 2005, USA imported 38,530tonnes of DC, which at 14.5% oftotal global imports makes it thebiggest consuming country of DCin the world

DC imports by region in thousand tonnes Share in 2005

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

Chapter 2 Demand


47/144

45supported by

1Introduction

3Competi-tiveness

4Impact

6NextSteps

2Demand

5Opport-unities

Demand for coconut


Coconuts

Copra




Other utilizations

Chapter 2 Demand

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

Other utilizations of coconut Overview


48/144

46supported by

In addition to the various uses of the coconut

fruits, all other parts of the coconut can bemanufactured into commercial products, includingthe coir and leaves. The coconut palm wood alsohas many potential uses such as:ConstructionFurnitureHandicrafts

CharcoalFibreChemicals

Supply of Coconut Wood:Indonesia, the Philippines and some Asia/Pacific

countries where there are large areas with senilepalms available to be cut up and processed intococonut wood products

Demand for Coconut Wood:The demand for coconut wood has increased for

housing, construction, furniture, novelties, etc., forboth domestic and export markets. Europe and theNorth American countries are good destinations forcoconut wood furniture and other small andinexpensive novelty items considering its attractiveclear-grained appearance and durability.

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

Among coir-based products, the demand for imported fibre has increasedidl 218 800 i 2006 20 7% i 1996 EU i h i


49/144

47supported by

rapidly to 218,800 tonnes in 2006, or 20.7% p.a. since 1996. EU is the mainmarkets for those products

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

Total import of selected coir-based coconut products in thousand MT

48.7 44.1 40.0 42.3

110.3122.9

185.9 183.8

218.8

30.6

22.2 13.0 15.1

18.218.2

18.3 14.2

15.3

31.3

26.036.8 37.0

37.3 36.1

45.5 50.7

44.0

0

50

100

150

200

250

300

1998 1999 2000 2001 2002 2003 2004 2005 2006

Coir Mats, Matting & Rugs

Coir Yarn

Coir Fibre

4.4 %

- 8.3%

20.7%

CAGR98 06

Source: Coconut Statistical Yearbook 2006, APCC

In the furniture and flooring markets, products based on coconut wood compete


50/144

48supported by

with many woods and other materials, but this market has been growing rapidly

Source: Mekong Bamboo, PI, BJC: Builders Joinery and Carpentry Products

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

400 12003100

6000 650010000

14000

27000

57000

7

10

88

7.5

55

5.5

3.5

0

10000

20000

30000

40000

50000

60000

Chopstic

ks

Activ

atedca

rbon

Charco

al

Handicra

fts BJC

Blin

ds

Woo

dfloor

ing

Woodp

anels

Woo

dfun

iture

USD m

0

2

4

6

8

10

12%

Global markets 2006 (USD m) Global market growth (% pa)

Supply conditions may also favour an increase in demand for coconut wood


51/144

49supported by

Coconut wood has considerable potential in the future because:

In Asia the availability of preferred tropical hardwood has declineddramatically in recent years, especially in areas with high populationdensity

The extensive amounts of senile and unproductive coconut trees in theAsia/Pacific region will have to be cut and replaced by younger and high-yielding varieties thus releasing huge volumes of raw materials for use

Coconut wood processing technologies and appropriate machinery andequipment have been developed to enable efficient commercial operationfor coconut wood use

There are also significant prospects for income and employment

generation to be derived from increased utilization of coconut wood.

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

While the older average age of coconut trees in some countries may positionthem better for the supply of coconut wood than Vietnam, the size and recentgrowth rate of the furniture market in particular still makes it potentially attractive

3. Competitiveness


52/144

50supported by

1Introduction

3Competi-tiveness

4Impact

6NextSteps

2Demand

5Opport-unities

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

Global supply chain

Some major coconut products

Local supply chain

Competitiveness of Vietnam in international coconut market

VietnamThailand


53/144

51supported by

Area under coconut (ha): 132,700

-In ml nut equivalent: 681

-In Copra equivalent (MT): 151,300


-In ml nut equivalent: 1,248


Malaysia


-In ml nut equivalent: 402


India

Area under coconut (ha): 1,935,000


-In Copra equivalent (MT): 1,833,000

Papua New Guinea


-In ml nut equivalent: 812-In Copra equivalent (MT): 162,600

Philippines


-In ml nut equivalent: 12,600-In Copra equivalent (MT): 2,474,000

Sri Lanka




Indonesia



-In Copra equivalent (MT): 3,186,715

Selected countries of APCC the largest coconut-producing region in the world

World production of coconuts in 2006 in nut equivalent was around 55,569million nuts. APCC countries are the largest coconut producers with ~85% of


54/144

52 supported by

million nuts. APCC countries are the largest coconut producers with 85% oftotal production, although this figure is barely growing

1.844.78

1000.47World

84.680.11

0.662.19

4.02-0.39

8.804.05

Share in2006 (%)

CAGR(1998 - 2006)

(%)Regions

Source: Coconut statistical year book 2006 APCC

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

Production of Coconuts in nut equivalent

0

10000

20000

30000

40000

50000

60000

70000

1998 1999 2000 2001 2002 2003 2004 2005 2006

mn Nuts

America

Africa

Other countries ofPacific

Others countries ofAsia

APCC countries

APCC includes 14 countries: F.S Micronesia, Fiji, India, Indonesia, Kiribati, Malaysia, Marshall Islands,Papua New Guinea, Philippines, Samoa, Solomon Islands, Sri Lanka, Thailand, Vanuatu, Vietnam

In the decade to 2006, the total global coconut cultivation area decreased byaround 0.83% p.a., while production and yield increased steadily


55/144

53 supported by

Total coconut cultivation area, production and yield

0

10000

20000

30000

40000

50000

60000

70000

1998 1999 2000 2001 2002 2003 2004 2005 2006

0

2000

4000

6000

Production (Mn nuts) Total Area (1,000 ha) Yield (Nuts/ha)

a ou d 0 83% p a , e p oduct o a d y e d c eased stead y

Total area has gone down to 11.7 million hectares in 2006 from 12.5 million hectares in 1998 becauseof senility, diseases, and weather, urbanization, and a switch to other more profitable crops.

Despite the reduction in total cultivation area, production has been increasing lightly with a CAGR of0.47% owing to a gradual increase in yield per hectare.

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

CAGR = 0.47%


The top 10 coconut-producing countries account for about 90% of worldproduction; most of them are in the APCC region, but their growth rates differ


56/144

54 supported by

Top ten coconut producers

0

10000

20000

30000

40000

50000

60000

1998 1999 2000 2001 2002 2003 2004 2005 2006

mn nutsThailand

Brazil

Myanmar

Vietnam

Sri Lanka

Philippines

Papua New Guinea

Malaysia

Indonesia

India

production; most of them are in the APCC region, but their growth rates differ

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities


0.1123.09

CAGR(%)

Share in2006 (%)

1.192.25

19.916.27

5.840.81

-5.981.23

1.245.01

-0.222.67

-0.681.46

-4.880.72

0.9526.96

0.47100World

Coconut production accounts for a very small part of the total world oilseedmarket and its share has fallen from 2% in 1996 to 1% in 2006


57/144

55 supported by

Share of world production of oilseeds in 2006

Pamlkernel

3%

Copra

1%Rapeseed

12%

Sunflower

seed

8%

Peanut

8%

Cottonseed

11%

Soybean

57%

Source: USDA and calculated

Coconut has grown at a slower pace than other

oilseeds because, as a perennial crop, itsproduction area cannot readily be reduced area intimes of excess and expanded in times of shortfall.

For production of biodiesel, coconut oil is notcompetitive with other oils, especially palm oil.Palm oil is a far more efficient producer of oil in

volume terms per hectare than other oils at 6,000litres/ha compared to coconut oils productivity of2,800 litres/ha.

For edible oil, soybean and sunflower oils arepromoted for consumption as poly-unsaturated oilsas a healthier alternative to coconut.

Share of world production of oilseeds in 1996

Soybean51%

Cottonseed13%

Peanut11%

Sunflowerseed9%

Rapeseed12%

Pamlkernel2%

Copra2%

100

2.74

1.34

11.827.72

7.99

11.06

57.32

Share in 2006 (%)

4.03Total

7.39Pam kernel

0.53Coconut

4.49Rapeseed2.61Sunflower seed

2.27Peanut

2.36Cottonseed

4.82Soybean

CAGR (%)Oilseeds

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

3. Competitiveness


58/144

56supported by

1Introduction

3Competi-tiveness

4Impact

6NextSteps

2Demand

5Opport-unities

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

Global supply chain


o Copra

o Coconut oil (CNO) and meal

o Desiccated coconut (DC)

Local supply chain


World production of copra has decreased slightly since 1998. APCC countriesare the leaders in production accounting for 90% of the global total


59/144

57supported by

are the leaders in production accounting for 90% of the global total

World production of copra

0

1000

2000

3000

4000

5000

6000

1998 1999 2000 2001 2002 2003 2004 2005 2006

1,000 MT

-0.28 %

World exports of copra and copra price

0

100

200

300

400

500

1998 1999 2000 2001 2002 2003 2004 2005 2006

1,000 MT

World Copra Price

Exports of copra account for only a small part of total copra production and the volume appears to beaffected by the export price

Copra can used for crushing oil, for copra meal, and for export. Some producers like to produce coconutoil and copra meal from copra or DC as an alternative to exporting copra, because of its higher value

Source: Coconut statistical year book 2006, APCC

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

The Philippines, Indonesia, and India are the largest producers of copraaccounting for 83% of world production


60/144

58supported by

Top ten copra production countries

0

1000

2000

3000

4000

5000

6000

1998 1999 2000 2001 2002 2003 2004 2005 2006

1,000 MT

Malaysia

Tanzania

Mozambique

Ivory Coast

Thailand

PN Guinea

Sri Lanka

India

Indonesia

Philippines

23.46-019

12.69-0.94

1.64-4.47

1.281.18

0.863.57

0.88-6.08

0.570.00

0.970.25

100-0.28World

47.140.53

1.541.66

Share in2006 (%)

CAGR (%)Countries


1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

Copra export has been decreasing at a CAGR of -3.51% since 1998 withThailand emerging as the largest single exporter


61/144

59supported by

g g g g p

CNO production of Philippines and Indonesia

0

50

100

150

200

250

1998 1999 2000 2001 2002 2003 2004 2005 2006

1,000 MT

Others

Sri LankaPN Guinea

Indonesia

Share of world copra export in 2006

Indonesia26%Thailand

30%

Others

22%

Sri Lanka

13%

PNGuinea

9%


CAGR:-3.51%

In 2006, Thailand beganexporting copra andbecame a leading exporter

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

3. Competitiveness


62/144

60supported by

1Introduction

3Competi-tiveness

4Impact

6NextSteps

2Demand

5Opport-unities

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

Global supply chain


o Copra

o Coconut oil (CNO) and meal

o Desiccated coconut (DC)

Local supply chain


World coconut oil production remained at more or less the same level from1998 to 2006, although exports have increased slightly


63/144

61supported by

0

100

200

300

400

500

600

700

800

1990 1992 1994 1996 1998 2000 2002 2004 2006

0

500

1000

1500

2000

2500

3000

Export volume (1,000 MT) Export price ($US/MT)

3150

2400

32403460

31003270

30403240 3100

0

500

1000

1500

2000

2500

3000

3500

1998 1999 2000 2001 2002 2003 2004 2005 2006

Exports of CNO accounted for 69.2% of CNO production in 2006 and have beenincreasing in recent years even though the export price has fluctuated and declined

1Introd-uction

3Competi-tiveness

4Impact

6NextSteps

2Demand

5Opport-unities

World CNO production in 000 MT Exports of CNO and its price

Source: USDA and APCC

The Philippines and Indonesia are the key producers and exporters of CNO

CNO d ti f Phili i I d i i 1 000 MT Sh i 2007


64/144

62supported by

9951184

9591152 1066

860

548497

535

752520

720

283455

345

372

319 309

0

500

1000

1500

2000

2500

2002 2003 2004 2005 2006 2007

Philippines Indonesia Others

Others

32%

Indonesi

a

29%

Philippin

es

39%

1305 1524 1273 1357 1352 1175

782757

758876 769 876

1010988

10071003 979 982

0

1000

2000

3000

2002 2003 2004 2005 2006 2007

Source: APCC and team calculations

1Introd-uction

3Competi-tiveness

4Impact 6NextSteps

2Demand

5Opport-unities

Others16%

Indonesia

38%

Philippines46%

CNO production of Philippines, Indonesia in 1,000 MT

CNO exports of Philippines, Indonesia in 1,000 MT

Share in 2007

CNOs share of the global vegetable oil market has fallen from 5% in 1996 to3% in 2006. Palm and soybean oil now dominate the market.


65/144

63supported by

Cottonseed

3%

Coconut

3%

Pamlkernel

4%

Peanut

4%

Olive2%

Sunflowerse

ed9%

Rapeseed

15%

Palm

31%

Soybean

29%

Coconut5%

Cottonseed5%

Pamlkernel

3%

Peanut

6%

Olive

3%

Sunflowerse

ed12%

Rapeseed

15%

Palm24%

Soybean27%

Source: USDA and calculated

1Introd-uction

3Competi-tiveness

4Impact 6NextSteps

2Demand

5Opport-unities

Recently, an increasing demand for CNO has been seen not only for food uses but alsoin the oleochemical and bio-fuel industries

In this market, coconut oil competes largely with palm kernel oil (PKO) since both oilshave a similar chemical composition.

Share of vegetable oil world production in 2006Share of vegetable oil world production in 1996

Copra meal is a by-product of extracting oil from copra, and is used as aningredient for animal feeds


66/144

64supported by

0

500

1000

1500

2000

2500

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Production Exports

Source: USDA and APCC

Indonesia

40%

Others4%

Philippines56%

In 2006 the Philippines was the largest supplier of copra meal to the internationalmarket, with exports of 490,000 tonnes

Indonesia was the second largest supplier, exporting 290,000 tonnes

1Introd-uction

3Competi-tiveness

4Impact 6NextSteps

2Demand

5Opport-unities

World copra meal production & exports in 1,000 MT Exports share in 2006

3. Competitiveness


67/144

65supported by

1Introduction

3Competi-tiveness

4Impact

6

NextSteps

2Demand

5Opport-unities

1Introd-uction

3Competi-tiveness

4Impact 6NextSteps

2Demand

5Opport-unities

Global supply chain


Copra


Desiccated coconut

Local supply chain


World exports of DC in 2006 amounted to 315,000 tonnes, and grew at 4.5%(CAGR) from 1998 to 2006


68/144

66supported by

Philippine

s, 44%

Singapore

, 10%

Indonesia,19%

Others,

8%

Malaysia,

3%Netherlan

ds, 3%Viet Nam,

2%

Sri Lanka,

8%

Belgium,

3%

222256

278242

278 284 278299

315

1031

1148

791

999

842878

1051

641

915

0

50

100

150

200

250

300

350

1998 1999 2000 2001 2002 2003 2004 2005 2006

0

200

400

600

800

1000

1200

1400Exports (1000MT) Price (US$/MT)

The Philippines and Indonesia have long been played the dominant role in the DC

market, accounting for some 44% and 19% of the global DC market respectively.

Other countries such as Sri Lanka (and Singapore, presumably as a transshipment/processing country) have also emerged as important DC suppliers in recent years.


1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

Global DC exports and their average prices DC export share by country in 2006

DC appears to generate more value than other coconut products, as illustratedby figures from the Philippines


69/144

67supported by

1,020

73

544

443

93

Intl Price in 2006(USD/MT) (2)

126

4

65

85

74

Value (USD)(3) = (1)*(2)

0.800Husked nut

0.120Coconut oil

0.191Copra

0.124Desiccated coconut

0.050Copra cake meal

1,000 whole nuts(in MT ) (1)

Categories

Coconut conversion table and its value from 1,000 nuts

If exporting husked coconuts, the exporter loses the profit from theshell which can be made into charcoal, or activated carbon


1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

3. Competitiveness


70/144

68supported by

1Introduction

3

Competi-tiveness

4Impact

6

NextSteps

2Demand

5Opport-unities

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps

2Demand

5Opport-unities

Global supply chain


Local supply chain

Copra

Coconut oil (CNO) and meal



Coconuts are grown mainly in the south of Vietnam


71/144

69supported by

Major coconutcultivars in Viet Nam

Tall coconuts forprocessing:

Ta coconutDu coconut

Giy coconut

Bung coconut

Sp (Makapuno)

Dwarf coconuts fordrinking:

Xim coconut

Da coconut

Tam quan coconut

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps2

Demand

5Opport-unities

The areas of the country that cultivate coconuts are mainly in the Mekong RiverDelta (13 provinces ), which account for 69% of total coconut cultivation area


72/144

70supported by

Ben Tre Province in theMekong River Delta hasthe largest planted area ofcoconuts in Vietnamaccounting for 28.2% of

the countrys total coconutcultivation area

In most recent years, theprices of coconut have

been increasing so thearea devoted to coconutcultivation in Ben Tre hasbeen recovering

Ben Tre PeoplesCommittee is planning toincrease cultivation overthe next few years


132,700

37,400

12,000

9,850

9,780

8,000

7,000

6,900

6,300

6,200

6,100

4,800

4,500

4,2009,670

Area (ha)2006

681,000

224,400

54,000

44,325

48,900

40,000

35,000

34,500

28,350

31,000

30.500

21,600

22,500

21,00033,425

Production(1,000 nuts)

Whole country

Ben Tre

Ca Mau

Can Tho

Tra Vinh

Kien Giang

Binh Dinh

Tien Giang

Bac Lieu

Quang Ngai

Dong Thap

Phu Yen

Long An

Vinh LongOthers

Province

100.00

28.18

9.04

7.42

7.37

6.02

5.27

5.20

4.74

4.67

4.60

3.62

3.40

3.177.28

Percent ofArea (%)

1Introd-uction

3Competi-tiveness

4Impact

6Next

Steps2

Demand

5Opport-unities

The total planted area of coconuts in Vietnam has decreased over the last 15years at a compound rate of -2.9% p.a.

Vi t t lti ti i th d h t


73/144

71supported by

Vietnam coconut cultivation area in thousand hectares

0

50

100

150

200

250

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

While there have been many reasons for this decrease including better alternativecrops, disease and pests the most important cause appears to have been a suddendrop in the coconut price which led farmers to cut down trees to plant other crops

CAGR:

- 2.89%

1Introd-uction

3

Competi-tiveness

4Impact

6

NextSteps

2Demand

5

Opport-unities

Source: GSO

While coconut production has declined owing to low prices and the consequentreduction of coconut cultivation area, since 2002 production has been stable asthe price of coconut has climbed again


74/144

72supported by

p g

1,1151,044 1,032

936

694 681 677 681799

2,100

780

2,000

2,500

3,200

800850

3,000

1,200

0

200

400

600

800

1,000

1,200

1998 1999 2000 2001 2002 2003 2004 2005 2006

0

500

1,000

1,500

2,000

2,500

3,000

3,500Production (Mn nuts) Fresh coconut price (VND/nut)


CAGR:-6%

1Introd-uction

3

Competi-tiveness

4

Impact

6

NextSteps

2Demand

5

Opport-unities

Vietnam coconut production and fresh coconut price

In recent years, the total area in Vietnam for coconut cultivation has dropped, butincreased for other perennials; the key causes are the fluctuation in coconutprices over the last 10 years and the rising price of other perennials


75/144

73

supported by

Sources: GSO Vietnam and calculated

1

Introd-uction

3

Competi-tiveness

4

Impact

6

NextSteps

2Demand

5

Opport-unities

Not only the occurrence of specialized crop zones with high value such ascashew, sesame, groundnut and other fruit crops, but also the change in cropstructure have had a strong impact on the coconut cultivation area

Area of perennial crops in thousand Ha

0

100

200

300

400

500

600

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Tea

Coffee

Rupper

Pepper

Cashew

Coconut -2.07

8.78

17.38

5.83

8.69

5.42

CAGR (%)Crops

Rubber

A simplified diagram can illustrate the flow of Vietnamese coconut inputs andoutputs through the supply chain


76/144

74

supported by

Agro-Materialretailers

Seed supply

center

Seed supplyhouseholds

Producers

PrivateProcessingenterprises

Localconsumers

Processingfacilities

Agro-Materialcenter

Tradingcompanies

Collectors

Wholesalers:

(TBD)

Exporting

In general after harvesting, the producers will sell there nuts to the collectors or selldirectly to wholesalers/processing facilities. The wholesalers also collect nuts fromcollectors then move to private processing enterprises or export directly

1

Introd-uction

3

Competi-tiveness

4

Impact

6

NextSteps

2Demand

5

Opport-unities

Summary of the activities in the coconut supply chain in Vietnam

ProcessingProcurementPlantation


77/144

75

supported by

DC, candy, shell charcoal,burn coal, handicraft products,etc.

FruitsFruitsOutputs

- Processing facilities- Processing companies

- Households

- Production household- Hired workers

- Collectors/wholesalers- Processing facilities- Processing companies

- Productionhouseholds

- Hired workers

Actors

- Producing DC, candy, shellcharcoal, burned coal,handicraft products, etc.- Selling dried fruits

- Transporting and sellingfruits

- Planting- Caring

Activities

- Fruits- Shells- DC- Dippers

- Milk

- Fruits- Seedlings- Fertilizers- Chemicals

Inputs

ProcessingProcurementPlantation

1

Introd-uction

3

Competi-tiveness

4

Impact

6

NextSteps

2Demand

5

Opport-unities

ProcessingAction

The coconut supply chain in Ben Tre Province

ConsumptionTransportationPlantation Procurement


78/144

76

supported by

ocess g

Local market

Exporting

Co su pt o

Actors

1

Introd-uction

3

Competi-tiveness

4

Impact

6

NextSteps

2Demand

5

Opport-unities

Source: Team data collection and analysis

Transportationt t

CollectorsHouseholds

84% of growersare directly

involved inproduction, 16%(being large-scaled producers)hire workers.

75% of harvestedproducts are soldto collectors/wholesalers whilethe remaining25% are sold toprocessors

After being procured,some coconut fruits

are sold directly to theprocurement shipsfrom China andThailand, as well as tomajor processors.

The traders sell 62%of the output procuredto processors and theremaining 38%directly to procuringforeign ships

Coconut fruit canbe used as a fresh

coconut orprocessed intoproducts like freshcopra, coconut oil,coconut shelldipper, charcoal,fiber thread, candy,

handicraft items,etc

Over 65% of smallprocessors sell their

product at home,while the other 35%transport on theirown by simplemeans like bicycles,motorbikes, trolleys,or even on their

backs

The producingfacilities and traderstransport productsby trucks, junks,trains or ferry.

Export: The foreigninvested and local

enterprises export theproducts directly orthrough intermediariesto China, Malaysia,Japan, Sri Lanka,Korea, etc.

Local market: Theproducts are sold tomajor traders in thecities, candy producersand consumers insideand outside the province(25 million fruits), etc.

ProductionsHouseholds

ProcessingFacilities

Processingcompanies

Wholesalers & trading

Processing facilities

3. Competitiveness

3 65


79/144

77

supported by

1Introduction Competi-tiveness

4Impact NextSteps

2Demand Opport-unities

1

Introd-uction

3

Competi-tiveness

4

Impact

6

NextSteps

2Demand

5

Opport-unities

Global supply chain


Local supply chain

Copra Coconut oil (CNO) and copra



Copra production accounts for only a small part of copra equivalent, and thishas decreased dramatically from 68,000 tonnes in 1998 to 15,000 in 2006

Copra equivalent vs. copra production


80/144

78

supported by

0

50

100

150

200

250

1998 1999 2000 2001 2002 2003 2004 2005 2006

1,000 MT 1,000 VND/MT

0

1000

2000

3000

4000

5000

6000

7000

8000

Production

Copraequivalent

Local Copraprice

The remains of copra equivalent are used for fresh coconut or other industries which aremore efficient than for the oil industry, such as DC or candy


8.52

-5.28

-17.22

CAGR(%)

Categories

1

Introd-uction

3

Competi-tiveness

4

Impact

6

NextSteps

2Demand

5

Opport-unities

3. Competitiveness

3 65


81/144

79

supported by


4Impact NextSteps


1

Introd-uction

3

Competi-tiveness

4

Impact

6

NextSteps

2Demand

5

Opport-unities

Global supply chain


Local supply chain

Copra




CNO production and export have also been declining in Vietnam. In 2006 theexport price was lower than the local price so no CNO was exported

Vietnam CNO production & export


82/144

80

supported by

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

1998 1999 2000 2001 2002 2003 2004 2005 2006

0

2000

4000

6000

8000

10000

12000

14000

16000

Production Export Local price Export price

In the domestic

market, thedecrease inCNO productionwas affected byincreases inincome and by

other substitutevegetable oils

The CAGR ofCNO productionfrom 1998 to2006 was -

18.88%


CAGR:-18.88%

1

Introd-uction

3

Competi-tiveness

4

Impact

6

NextSteps

2Demand

5

Opport-unities

p p

In MTFOB Price in 1,000VND/MT

3. Competitiveness

3 65


83/144

81

supported by


4Impact NextSteps


1

Introd-uction

3

Competi-tiveness

4

Impact

6

NextSteps

2

Demand

5

Opport-unities

Global supply chain


Local supply chain

Copra




DC was produced in Vietnam a last few years ago and production have beenincreasing both volume and price.


84/144

82

supported by

Production and export of DC

7000

12000

25000

20000

8000 7000

13000

7000

612

706

787

0

5000

10000

15000

20000

25000

30000

2003 2004 2005 2006

MT

Export price (FOB

US$/MT)

0

100

200

300

400

500

600

700

800

900

Production Export Export price

The DC export market of Vietnam is mainly China and some Middle Eastern countries

Source: Coconut statistical year book 2006, APCC and FAOSTAT, field trip

It takes 7.5nuts toproduce 1kgof coconut oil

but only 2.5nuts toproduce 1kgof DC

The price of

DC is over1,000 USD/ton(2008) whilecoconut oil isabout 600USD/ton.

1

Introd-uction

3

Competi-tiveness

4

Impact

6

NextSteps

2

Demand

5

Opport-unities

3. Competitiveness

3 65


85/144

83

supported by


4Impact NextSteps


1

Introd-uction

3

Competi-tiveness

4

Impact

6

NextSteps

2

Demand

5

Opport-unities

Global supply chain

Local supply chain


Copra



Study on coconut competitive advantage of Vietnam

Both the production and cultivation area of coconuts in Vietnam are lowcompared to its main Asian competitors

2006Production of coconus in nut equivalent of some APCC countries


86/144

84

supported by

Although Vietnam has the lowestproduction levels and area of thefour Asian countries shown here,

its average yield is higher thanboth Indonesia and the Philippines

1

Introd-uction

3

Competi-tiveness

4

Impact

6

NextSteps

2

Demand

5

Opport-unities

5,200681132

5,6002,215395

4.20015,9343,817

4,00012,9663,311

Productivity(nuts/ha)

Production(mn nuts)

Area(1,000 ha)

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

1998 1999 2000 2001 2002 2003 2004 2005 2006

Indonesia

Philippines

Sri Lanka

Vietnam

Coconut cultivation area of some APCC countries

0

1000

2000

3000

4000

1998 1999 2000 2001 2002 2003 2004 2005 2006


Vietnam has dramatically increased its export of fresh coconuts which nowaccount for around 21% of world coconut exports

Vietnam

I 2006 Vi d 76

Exports of fresh coconut of some APCC countries

1 000 t


87/144

85

supported by

In 2006, Vietnam exported 76thousand tons of fresh coconuts

Most of Vietnams coconuts areexported to China or Thailand

Source: FAOSTAT

1

Introd-uction

3

Competi-tiveness

4

Impact

6

NextSteps

2

Demand

5

Opport-unities

The reasons that Vietnam has become the leading exporter of coconuts include:

-While the domestic price of coconuts is rising, it has not yet caught up with the China coconut importprice, so a large quantity of Vietnams coconuts are exported, especially to China and Thailand

-The CNO industry has been declining; the domestic copra price has been increasing while oil industryprofits have been lower over the last 10 years so people prefer to export rather than process nuts

525077

-150190200

304324319

204179231250

200020012002

2003200420052006

Domestic priceVietnamUS$/ton

World price(FOB Philippines)

US$/ton

country

Exports of fresh coconuts (US$/ton)

010

20

30

40

50

60

70

80

90

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

1,000 tons

Indonesia Philippines

Viet Nam Sri Lanka

3. Competitiveness

1

3

C ti 4

6

N t2

5

O t


88/144

86

supported by


4Impact NextSteps

Demand Opport-unities

1

Introd-uction

3

Competi-tiveness

4

Impact

6

NextSteps

2

Demand

5

Opport-unities

Global supply chain

Local supply chain


Copra




While Indonesia and Sri Lanka have increased their exports of copra, Vietnamand Philippines have nearly ceased exporting

Copra export of Vietnam and other countries


89/144

87

supported by

Copra export of Vietnam and other countries

0

20

40

60

80

100

120

1990

1992

1994

1996

1998

2000

2002

2004

2006

1,000 tons

Indonesia Philippines Vietnam Sri LankaPhilippines uses

most of their own

copra and imports

copra to extract

coconut oil and by-

products for value

added

Vietnams copraproduction has

declined, with

coconuts being used

to produce DC for

more value added

1

Introd-uction

3

Competi-tiveness

4

Impact

6

NextSteps

2

Demand

5

Opport-unities

Source: USDA

In case of the Philippines and Vietnam, the domestic price of copra is higherthan the export price and the two countries have reduced copra exports

Philippines: Domestic price vs Export price of copra

4084022006

Vietnam Domestic price VS Export price of copra


90/144

88

supported by1

Introd-uction

3

Competi-tiveness

4

Impact

6

NextSteps

2

Demand

5

Opport-unities

Source: Coconut statistical yearbook, APCC and USDA

229

175

287

325

489

408

408

314

202

266

300

450

414

402

0 100 200 300 400 500 600

2000

2001

2002

2003

2004

2005

2006

US$/ton

Domestic Export

238

158

156

281

306

337

442

221

199

154

145

268

414

402

0 100 200 300 400 500

2000

2001

2002

2003

2004

2005

2006

US$/ton

Domestic Export

Sri Lanka :Domestic price VS Export price of copra

528

453

581

487

564

653

609

524

455.12

743.32

661.54

689.97

747.94

694

0 200 400 600 800

2000

2001

2002

2003

2004

2005

2006

US$/tonDomestic Export

Indonesia: Domestic price VS Export price ofcopra

160

160170

240

320

310

290

314

202

266

300

450

414

402

0 100 200 300 400 500

2000

2001

2002

2003

2004

2005

2006

US$/ton

Dom estic Ex port

3. Competitiveness

1I t d ti

3

Competi 4I t

6

Next2

D d

5

Opport


91/144

89

supported by


4Impact NextSteps

Demand Opport-unities

1

Introd-uction

3Competi-tiveness

4

Impact

6Next

Steps

2

Demand

5Opport-unities

Global supply chain

Local supply chain


Copra




CNO t i f Vi t d APCC t i

Vietnam CNO has declined mainly because that it export price is lower than theDC export price, although it is higher than some other APCC countries


92/144

90

supported by1

Introd-uction

3

Competi-tiveness

4

Impact

6

NextSteps

2

Demand

5

Opport-unities

Source: USDA

CNO export price of Vietnam and some APCC countries

0

200

400

600

800

1000

1200

1998 1999 2000 2001 2002 2003 2004 2005 2006

U

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