28/09/2011 (ABS CBN News) - The Philippines could expand its palm oil acreage to up to 1 million hectares (2.47 million acres) from about 55,000 hectares now, but is weighing the impact on its major coconut oil industry before committing to a long-term plan, a senior official said on Friday. 

Coconut is a major dollar earner for the Southeast Asian country, the world's top supplier, and a greater focus on palm oil production could be at the expense of coconut oil exports and hit domestic demand. 

The Philippine Coconut Authority (PCA), the state agency overseeing the coconut and palm oil sectors, is also wary of some coconut farmers switching to palm oil -- widely used in  cooking and is cheaper than coconut oil -- exacerbating the decline in production of the traditional produce. 

But steadily rising domestic demand for palm oil and imports may yet prompt full-blown government support for the sector. 

"What we need is a master plan for long-term development of our palm oil industry," Carlos Carpio, deputy administrator for research and development at PCA, told Reuters. 

The palm oil industry, represented by the Philippine Palmoil Development Council (PPDC), on Wednesday presented a proposed road map to develop the sector to the PCA Governing Council chaired by Agriculture Secretary Proceso Alcala. 

Under the proposal, palm oil acreage will be expanded to 62,500 hectares this year and to 200,500 hectares by 2016. 

Expanding the palm oil acreage to up to 500,000 hectares could provide employment to around 1 million rural workers and boost annual output to 2 million ton, more than enough to meet domestic demand, according to the road map. 

If production is ramped up to 2 million tons, the Philippines could earn at least $2 billion from exports of palm oil annually, based on industry estimates. Coconut oil exports generated $1.3 billion in revenue last year.   

Philippine coconut oil exports, accounting for more than half of global supply, have been shrinking as millions of trees are ageing and dying. Extreme weather is also blamed for the drop in output of coconut oil and other coconut products. 

Road map proposed

The country has not done much to develop its palm oil industry while neighbouring Indonesia and Malaysia are top producers of the vegetable oil. Thailand has expanded acreage to more than half a million hectares over the last 10 years. 

"We admire our neighbours for what they have done to develop their palm oil industries. Our question is, can we do that in the Philippines?" Carpio said. 

Indonesia, the world's No. 1 palm oil producer, has planted 7.5 million hectares out of 10 million hectares available and expects to produce 21-23 million tons of crude palm oil this year, rising to 30 million tons by 2015. Malaysia, the second-largest producer, has 4.85 million hectares out of potential acreage of 5 million hectares.    

Carpio said the draft paper could help in the formulation of a master plan for palm oil development. 

"But a careful balancing act is necessary," he said. "We see the need to develop the palm oil sector but we are also mindful of the impact on coconut oil, which is one of our top exports." 

Coconut farmers may be encouraged to shift to palm oil if prices were more favourable and if the government provides full support to a nascent industry, he said. 

"It should be clear in the master plan up to what extent the conversion should be allowed," he added. 

Coconut oil for October-November delivery is at $1,205 a ton, still offering a premium to palm kernel oil priced at $1,150 per ton. 

The Philippines has coconut acreage of about 3 million hectares, which may shrink given millions of old and dying trees and the absence of a replanting program. 

"Indonesia has overtaken us in terms of coconut acreage, with more than 4 million hectares planted," Carpio said. About 44.8 million coconut trees, or 14% of the total in the Philippines, are now deemed less productive. 

The PPDC said the shortage of vegetable oils in the Philippines may be aggravated by falling coconut oil output.     

Coconut oil exports declined 42 percent from a year earlier in January to July to 506,567 tonnes as a result of tight copra supply, industry data show.

The United Coconut Associations of the Philippines has forecast coconut oil exports at 900,000 tons in 2011, down almost a third versus last year's total shipments of 1.32 million tons. 

The lack of milling facilities for palm oil, particularly in the southern Mindanao region where large tracts of land are available for palm oil, is also a major concern, Carpio said, adding most of the oil mills are located in the main coconut-producing Quezon province in Luzon. 

The Philippines has been a major importer of palm oil as domestic supply of vegetable oils is not enough to meet the demand of a growing population. 

In 2010, the country imported 205,000 tons of palm oil worth 9.68 billion pesos ($221 million). 

If no major expansion takes place in the next 10 years, the industry forecasts palm oil imports to hit 576,000 tons by 2022, valued at P27.26 billion at current prices.