The Philippines ships an average of 1 million tons a year, typically selling 70-80 percent of its coconut oil on the international market, being used in food, cosmetics and biodiesel. It has been tested for use as a feedstock for biodiesel to be used as a diesel engine fuel. In this manner it can be applied to power generators and transport using diesel engines. Coconut oil constitutes seven percent of the total export income of the Philippines.

The Philippines produces most of the world's dried coconut products and has had a reputation of producing a very high quality product for many years. United Coconut Association of the Philippines Inc (UCAP) showed its exports grew 23% in June from a year earlier. Coconut oil prices in the global market climbed 4.6% in June from May and 60.8 % from a year earlier.

The average price was $800 per tonne in November 2007 compared with just $536 at the same time the prior year. The highest CIF price offered for a nearby position on coconut oil recently reached $1620 per tonne. Indonesian output, the second biggest exporter, was higher last year but global stocks still remain low.

Global demand for coconut oil will exceed exports in the second half, boosting prices, as restaurant companies including Mc Donalds Corp. shift to trans-fat-free oils. China's imports may rise 89% to 122,500 tons in the second half. But with the rising prices of palm oil, the country has kept more of its coconut oil to use domestically in cooking rather than importing high price palm oil from Malaysia or Indonesia.

University of the Philippines Los Baños (UPLB) studied how coconut trees and their products were transported from the farmers to the traders, processors and finally to the consumers and looked at the costs incurred with each transaction and factors affecting the market of coconut products. Coconut farmers have low income because they only sell the raw materials which is not readily marketable. There are also other constraints for the farmers to link with markets. Poor farm-to-market road system, lack of capital and lack of information among others stand as blocks to profitable coconut industry.  Of course, the government must  move into something that would tap the industry's technology services, information, market, credit and entrepreneurship.

Meanwhile, surging prices of copra could prompt coconut oil mills in the Philippines to slow production. The recent surge in the prices of copra, the dried coconut meat from which oil is extracted is likely to wipe out profits from recently-contracted export deals. Current copra prices, hovering between 37 to 38.50 pesos ($1=PHP45) a kilogram, a 30% higher from prices. It could further limit the supply of coconut oil available for exports and thus keep export prices high in the near term.

CIIF Oil Mills Group, the country's largest exporter of coconut oil, accounts for about 40% of the country's overall coconut oil exports, now operating only two of its five oil mills. The prevailing tightness in copra supply has reduced Philippine exports of coconut oil in February to 78,980 metric tons, down 30% from 112,680 tons exported in January.

Coconut farmers here are demanding the release of the accrued coconut levy fund earning to a fund they're setting up to develop and protect the country's ailing coconut industry. Decades of controversy has hounded the coconut levy funds, originally set up by former President Ferdinand Marcos to stabilize the domestic copra prices and as a subsidy to protect the industry. Hope that the government will resolve this long over-due coconut levy fund controversy in favor of the coconut farmers.