April 20, 2012

Philippines is the third largest US soy importer, coconut oil exporter

Both in 2010 and 2011, Philippines was the largest coconut oil (CNO) exporter and the third largest market for US soymeal (SBM).

Continued economic growth and an expanding middle class drove imports of SBM to 1.72 million tonnes in 2011. Though consumption will likely continue growing modestly, imports in 2012 are expected to slightly decline to 1.6 million tonnes due to adequate stocks, before increasing to 1.70 million tonnes in 2013.

The effects of an El Nino dry spell in 2010, coupled with the stress on coconut trees after three successive years (2008-10) of heavy nut bearing, resulted in a steeper decline (25%) to 2.1 million tonnes in coconut production in marketing year (MY 2010-11 than previously predicted (18% to 2.3 million tonnes).

With reduced copra supply in 2011, production, consumption and exports of copra meal and CNO were limited in MY2010-11 and MY2011-12. Copra output, however, will likely increase to 2.50 million tonnes in MY2011-12 and 2.55 million tonnes in MY2012-13, as coconut trees recover and copra production improves. Philippine soy production is insignificant and the small amount of imports is purchased by one crusher.

Meat demand by an expanding middle class is expected to fuel increasing feed consumption in the next two years. SBM imports of 1.7 million tonnes in 2011, however, were less than expected due to increasing production costs. SBM imports in 2012 are likely to decline to 1.6 million tonnes due to adequate beginning stocks, but modestly rise to 1.7 million tonnes in 2013 as feed demand increases as the economy continues growing.

Copra meal is not a protein substitute of SBM and because a considerable volume is lost as waste, copra meal consumption is not an ideal measure of domestic animal feed demand. Copra meal exports are expected to increase to 500,000 tonnes in MY2011-12, and increase anew to 510,000 tonnes in MY2012-13 reflecting the improvement in copra supply.

Local soyoil (SBO) production and trade are insignificant due to the local preference for CNO and palm oil. Tightness in local CNO supply in MY2010-11 resulted in a shift away from CNO to imported palm oil use, mainly for local food purposes, according to industry. Palm oil imports almost doubled (78%) in 2010 as a result of the elimination of import duties under the ASEAN Free Trade Agreement (AFTA), and in 2011, surged by 353,000 tonnes (170%) from the 2010 level to reach nearly 572,000 tonnes.

The increased use of imported palm oil (estimated at 250,000 tonnes in 2011) for local food purposes is expected to continue through MY2012-13, allowing the displaced CNO volume to be exported. This scenario is premised that the price differential between CNO and palm oil prices remains high.

CNO is the top Philippine agricultural export and the US its top buyer. According to the Philippine Coconut Authority, in 2011, while exports declined by close to 40% from the previous year's level to 830,000 tonnes, export value rose by 12% to reach a record US$1,408 billion, enhanced by roughly an 83% rise in average export prices. High CNO prices are likely to persist through MY2012-13 and exports are expected to grow as coconut production increases.