Insufficient info on coconut given to economic managers

Because there was insufficient information on coconut methyl ester (CME) given to our economic managers,  there is an existing position today that is significantly  affecting our impoverished 3.4 million coconut farmers. In normal times, when a coconut is sold at P12, the farmer earns only P20,000 a hectare. Today, this farmer earns less than half  because a coconut now sells at less than P4 a piece. This situation can be alleviated  if the Biofuels Act of 2006 is implemented by  increasing  the CME content of biofuels from 2 percent to at least 5 percent. This will increase the annual CME demand from 144 million to 360 million tons. In 2012, the mere announcement of this (even though it was never implemented) increased the coconut price from P12 to P18.

Today, 12 years after  the CME law was passed, the CME content in diesel remains at  2 percent. This is in stark contrast to Malaysia’s 7 percent and Thailand’s 20 percent vegetable oil in their biodiesel. In a Dec. 10 Inquirer report, Karl Ocampo wrote:  “Groups continue to lobby for the additional use of coconut oil in domestic fuel despite opposition  from economic managers who are saying the move was inflationary.” This is the main reason why we remain at 2 percent.

If  sufficient information had been  given,  the P1 increase in diesel fuel is the opposite of inflationary. Rafael Corpus of the Asian Institute of Petroleum Studies can show studies stating that a peso increase in the biofuel diesel cost will result in at least P5 in added value. This will come from the increased mileage derived from the new diesel mix with 5 percent CME.

CME can be likened to plant  fertilizer. When a P300  plant is given P10 more in fertilizer,  there is an increase in cost for the plant  itself.  But what is also relevant and more valuable  is the fruit harvest from  the plant. The plant is only a means to produce the fruits. If the additional fruits increase the total value of the harvest by P50, then the entire net value derived is P40, not a negative P10. Thus, given the total picture, the added P10 fertilizer cost is not inflationary. This is because instead of getting less value for the peso spent which means inflation, one gets more value for the peso because of the benefits derived from that peso. For this example, the added value is five times more.

Like fertilizer, the CME increase from 2 to 5 percent results in added mileage. This has a value  five times more than  the increased cost of CME inclusion.

An economist from the Agri Fisheries Alliance volunteered to present this to a relevant  secretary, and suggested he accompany the PCA to help explain this to the economic managers. Both suggestions  were turned down. The result was insufficient information, which is  not fair to the economic managers.

In the meantime, the world prices continue to decrease. Traders and others try to save their previous margins by decreasing the coconut farm gate prices. At  the Dec. 11 meeting of the Management Association of the Philippines ABCD Foundation, Rossano Veluz  said the price of coconut had dropped from P12 to P3. Consider the table below.

Increasing the CME component of biodiesel to 5 percent will mean an additional P1 a liter. Since diesel price was cut by P2.10 as reported on Dec. 4, there will still be a net P1.10 decrease if the CME hike of P1  is applied.

There will be three beneficial results. First, there will be a 500-percent return on the CME investment. From a wholistic viewpoint, it is the opposite of inflationary. Second, the farmer’s depressed coconut price will increase, and their sad plight alleviated because of the new CME demand. Third,  we will save on foreign exchange as we move from imported diesel to local CME.

With sufficient information given to economic managers, they can continue doing praiseworthy work for our people.