Shannon Kamille T. Matalog Agricultural Economics141 Section T-2L Exercise 2 Market Study I. Product escri!tion 1.

"ame o# t$e Product

Dr. Salvador Catello

Coconut is one of the major crops in our country. People often term it as the Tree of Life !ecause it provides food and ra" materials that are !eing highly utili#ed !y men. $umerous products and !y%products are also !eing derived from this tree ma&ing it very via!le resource to men. Coconut Methyl 'ster (CM')* a product !eing processed mainly from coconut meat* is my target commodity to study. 2. %eatures o# t$e Product Coconut Methyl 'ster or coco !iodiesel undergoes further processing of coconut oil and is intended for fuel application. +t is primarily used in !lending !iodiesel to diesel and !e used as fuel in diesel engines. The fatty acid component of coconut oil is converted to another element called ester. ,lycerin and fatty acids are separated from each other !y a process &no"n as transesterification. Coconut oil is reacted to methanol forming Coconut Methyl 'ster (-m!as* .//0). The follo"ing e1uation simplifies the reaction of CM'. Coconut oil 2 Methanol Methyl ester 2 ,lycerol

Good quality petroleum diesel has a carbon chain distribution of C 8 C18. Coconut oil itself has C8-C18 (biofuels.com).

&. 'ses o# t$e Product CM' is e3tracted mainly from copra. +t is further processed and reacted "ith alcohol to yield coco !iodiesel. 4y%products o!tain from processing of CM' are can !e used in soap ma&ing* mi3ing "ith feed mills and fertili#ers* that give rise to inputs to other products. -s a finished product* CM' is to !e !lended to diesel to produce coconut !iofuel. 5nly 67 CM' is !lended to 887 petroleum diesel9 the Philippine $ational Standards (P$S) currently allo" a ma3imum of 67 CM' !lend.

$o"adays* the effects of glo!al "arming and air pollution are greatly !eing e3perienced. Petroleum as our source of fuel greatly contri!utes to the pollution of our air emitted !y the vehicles and factories. +t is our concern to lessen and prefera!ly to shift to alternatives that reduces the causes of these pro!lems. :sing CM' lessen the e mission of particulate matter !y as much as ;/7 from as little as 67 !lend in lo" sulfur diesel (Dia#* undated). Po"er ,enerators can use Coconut 4iodiesel as their source of fuel for po"er and energy9 and transport using diesel engines. 4. (eogra!$ical Areas o# is!ersion There is 4iofuel Project on going in our country as of Septem!er .//<. This includes the production of different !iodiesel from coconut* jathropa* oil palm9 sugar cane* and cassava for production of !ioethanol. The areas "here CM' are !eing processed are found in +locos Sur* Davao* Laguna* Manila* =am!oanga del $orte* >ue#on and ?om!lon (5rcullo* .//<).

II. emand 1. )$o and *$ere is t$e market+ The study of esta!lishing Coconut Methyl 'ster processing plant is intended to !e !uilt in 4arangay Putho%Tuntungin* Los 4a@os* Laguna. The plant is preferred to esta!lish there since the !arangay has hectares of vacant land. Moreover* numerous coconut trees are can !e found in the mountainous area "here the primary input (coconut) for CM' production can !e easily !ought and accessed from lando"ners. This "ill minimi#e the cost of transporting the inputs from the producer to the processing plant of CM'. The !usiness is in large%scale operation. The product (CM') is to !e distri!uted in the area of Laguna* to supply the demand for !iodiesel as additive to fuel. The target mar&et or consumers of the coconut !iodiesel are manufacturers that !lend CM' and petroleum into !iofuel9 and also consumers that "anted to !uy 46//* pure su!stance of coconut methyl ester. 2. %actors A##ecting emand The study of the via!ility in esta!lishing a processing plant of CM' "ill !e "ithin a five%year span from year .//A to ./6B. -s an alternative in minimi#ing the consumption of pure petroleum diesel used in running our vehicles* the demand for CM' in the target mar&et "hich is in Laguna* is !ased on the assumption that the vehicles used for pu!lic and private transportation are li&ely to shift in using !iofuel. The num!er of vehicles present or !eing used !y the residents in Laguna is determined from the statistics provided !y the Land Transportation 5ffice. -ssumption of the current and future population of vehicles in the province is prepared.

-s of -ugust /6* .//<* according to the estimation of $ational Statistics 5ffice* the province of Laguna has a population of .* C<B* 0B/. The computed annual population gro"th rate* also provided !y $S5 is 3.55% from year .///%.//< for the said province. Dhile the vehicles present as of the year .//< is 6CC* 00B (!ased on the assumption that ./7 of the registered vehicles from LT5 is contri!uted !y Laguna) "ith 6./07 of gro"th rate. -ccording to a survey entitled The Issues and Question Relating to Cocobiodiesel (2007)* the estimated annual consumption of diesel%fuel locally is < !illion liters per annum. Since the target !lend ratio of CM' is 67* the re1uirement is </ million liters per annum. Setting an assumption that 6..07 is the total consumption of CM' in Laguna9 hence* A<0 /// litters per annum is the consumption of CM' in the province. Eactors affecting the demand of CM' "ill lie on the selling price of the processed !iodiesel. Comparing the selling price of CM' mi3ed "ith fuel* the price of pure diesel is much cheap. +t is !ecause of the additional production cost incur in producing CM'. The cost of producing CM' is around Php .8.</ per liter9 hence it is 1uite costly to shift to this &ind of !iofuel (-m!as* .//0). 'conomic preference of consumer affects the demand. :tili#ing CM' addresses to do "ays in saving petroleum "hich are derived from fossil. De &no" that e3tracting oil used as fuels is not rene"a!le. +t ta&es million of years to ma&e petroleum out of fossils. Moreover* the use of petroleum in running our vehicles produces much emission of car!on dio3ide* nitrogen* sulfur and other particulate matters that sadly* pollute our environment. Shifting to coconut !iodiesel as additive to fuel promotes in lessening pollutants in the air and saving much energy "hich are primarily derived from fuels. The use of !iodiesel also provide environmental as "ell as health !enefits. &. Total emand -ssumptions are prepared in computing for the total demand present in the target mar&et "hich is Laguna. The actual and present statistics involving the needed data are not availa!le* given from a !ased year (.//<)* the population* num!er of vehicles and demand for CM' "ere determined using e3isting figures and data.

-ear 2334-2335 2335-2336 2336-2313 2313-2311 2311-2312 2312-231&

.Po!ulation .*0;6*BC/ .*;0.*.;A .*<C;*C.B .*ACB*8.6 .*8CC*AA/ B*/C8*C.B

../e$icles 6C;*/<6 6C<*;/0 6C8*60C 60/*<.6 60.*B/B 60.*B/B

0ME emand 1liters2 AA0*8BA A8<*/6. 8/A*..C 868*0<< 8B6*/<. 8C.*<6/

Ta!le6. The Population* $um!er of Fehicles and CM' Demand in Laguna (.//<%./6B)
G-ssuming that Population in Laguna (.//<) H .* C<B* 0B/9 -nnual ,ro"th ?ate H B.0079 CM' Demand H 6..07 GG-ssuming that the num!er of vehicles in Laguna (.//<) H 6CC* 00B9 ,ro"th ?ate H 6./07

-ear 2334-2335 2335-2336 2336-2313 2313-2311 2311-2312 2312-231&

0ME emand 1liters2 AA0*8BA A8<*/6. 8/A*..C 868*0<< 8B6*/<. 8C.*<6/

/e$icles 6C;*/<6 6C<*;/0 6C8*60C 60/*<.6 60.*B/B 60.*B/B

7uantity emanded o# 0ME !er /e$icle 1liters2 ;./< ;./< ;./8 ;.6/ ;.66 ;../

Total emand #or 0ME 1liters2 AA;*;0/.8< A80*8;..B0 8/A*BC<.A; 868*B8A.6/ 8B/*0<6.BB 8CC*.<A.;/

Ta!le ..Total Demand of Coconut Methyl 'ster in Laguna

G>uantity Demanded for CM' per vehicle H CM' Demand I Fehicles GGTotal Demand for CM' in Laguna H $um!er of vehicles 3 >uantity Demanded for CM' per vehicle

4. E,aluation o# emand (ro*t$ Patterns The demand for CM' varies from one year to another* having set assumption of the num!er of vehicles and its increase per year* as "ell as the demanded CM' in liters every year. 5ther factors that "ill affect the change the demand are held constant. -s seen in the ta!le a!ove* the mar&et demand for CM' increases through years.

III. Su!!ly

1. )$o and )$ere are t$e direct com!etitors+ -s of January .B* .//A* there are a!out nine companies that produce CM' in the country. These producers are recogni#ed and are accredited !y the Department of 'nergy. The follo"ing are the set of firms that produces CM' and supplies "ithin the country. The list !elo" is gathered from the official "e!site of Department of 'nergy (httpKII""".doe.gov.phI).
08EM9E:; I"0<9P<9ATE ;0 +ndustria Street* 4agum!ayan* >ue#on City 4rand $ameK 4+5%-CT+F (CE-? $oK /C%/C%/66%CM') De!siteK """.chemre#.com SE"=EL %I"E 08EMI0ALS ./ th Eloor* ?ichville Corporate To"er 66/< -la!ang%=apote ?oad* Madrigal 4usiness Par&* -la!ang* Muntinlupa 4rand $ameK 'ST?5L (CE-? $oK /C%/C%/6.%CM') De!siteK """.sen!el.com %9E-/<""E MILLI"( SE9/I0ES $o. BB Juan dela Cru# cor. 4ayanihan Sts.* Toril* Davao City 4rand $ameK P5D'? = (CE-?K /;%/A%/B8ICM'% MIPIT%P?) MT. 8<LL- 0<0< I" 'ST9IAL 0<MPA"-; LT . Sitio Jasmin* 4rgy. Domoit* Lucena City* >ue#on Province 4rand $ameK MT. L5LLM 4+5E:'L (CE-?K /;%/A% /C/ICM'%MIPIT) =I<E"E9(- 5 0<9P<9ATI<" :nit 8;* 8thEloor* Colum!ia To"er* 5rtigas -venue* Mandaluyong City 4rand $ameK ,?''$ P5D'? D (CE-?K /<%/<% /C<ICM'%MIPIT) 9<MT9<" P8ILIPPI"ES Puro& -guila* 4gy. -nahao* 5diongan* ?om!lon 4rand $ameK ?5MT?5$ (CE-? $oK /;%/8%/CCICM'% MIPIT) P'9E ESSE"0E I"TE9"ATI<"AL; I"0. $o. C -vis St.* 4agong +log* Pasig City 4rand $ameK 4+5 P:?' (CE-? K/;%6/%/CBICM'%MIPIT) De!siteK """.pure%essence.!i# (<L E" ASIA" <IL I"TE9"ATI<"AL I"0. $o. C -vis St. cor. Ma3imo Elores St.* 4gy. 4agong +log* Pasig City 4rand $ameK CL'-$ -+? 4+5D+'S'L (CE-?K /<%/0% /;.ICM'%MIPIT) De!siteK """.goldenasianoil.com 9AS:A A(9< P9< '0E 0<9P<9ATI<" Km. A8.A Maharli&a Ligh"ay San -ntonio* San Pa!lo City 4rand $ameK D+'='L -+D' (CE-?K /<%/<%/C;ICM'% MIPIT)

2. %actors A##ecting Su!!ly Since the target location of esta!lishment of the CM' processing plant is in 4rgy. Tuntungin%Putho* the area is suited to !uild the plant for its spacious area and the area can also !e used for planting coconut trees and ac1uiring the availa!le inputs "ithin the locality. Lo"ever* the firm "ill first rely on inputs from other places. Coconut is a!undant in the province* ma&ing an assumption that there can !e numerous producers of coconut 4uilding a large%scale !usiness* aside from machines and e1uipment* man po"er is also needed9 hence* the residents in the !arangay are can !e employed to "or& in the

processing plant. Dith regards to technology* there are availa!le data and machines present in the College of 'ngineering and -gro%+ndustrial Technology. -vaila!le information and technology can !e great help in the success of producing the CM' since the college has already studied a!out production of CM' and its via!ility9 and developed technology in e3tracting CM'. The area or location of the processing plant is "ithin high "ays or road "here the !usiness is can !e easily located. Lo"ever* an infrastructure such as the road is accessi!le enough to transact !usiness and to deliver to the consumers. &. Total Su!!ly
0om!any =rand 1.08EM9E: I"0<9P<9ATE 2. SE"=EL %I"E 08EMI0ALS &. 9<MT9<" P8ILIPPI"ES; I"0. 4. P'9E ESSE"0E I"TE9"ATI<"AL; I"0 >. %9E-/<""E MILLI"( SE9/I0ES ?. (<L E" ASIA" <IL I"TE9"ATI<"AL I"0. 4. Mt. 8olly 0oco Industrial 0or!oration Total >&.&? 4>.1? 2>?.4? 9e#erence@ <rcullo; 2334 =rand =ioacti# Estrol 9omtron =io Pure Po*er : &3 0lean Air =iodiesel 4 4 233> 14.2 &? 3.1? 233? 4> &? 3.1? ?3 2334 4> 42 3.1? ?3 1>.?

Ta!le B.'stimated Capacity for Coco%4iodiesel Production (million liters) The $atioanl 'conomic Development -uthority (.//<) stated the e3isting capacity for production of CM' is estimated at 0Amillion liters per year* mainly from five major producers. Sen!el had a production capacity of B/ million liters of CM' as of .//C* follo"ed !y Chemre#* "ith 60 million.

4. E,aluation o# Su!!ly (ro*t$ Patterns

-s seen in the ta!le* the supply of CM' locally li&ely increases four times from .//0 "ith 0B.B; million liters of CM' to .0; liters in year .//< (as estimated !y Dr. 5rcullo). Supply for CM' is more li&ely to increase through the years since the government initiates the people to s"itch to alternatives that "ill lessen the consumption of diesel and also addressing to the continuous oil price hi&e affecting consumers directly !ecause of the increases in pu!lic fares. Moreover* people should !e more concern regarding the !ad effects of petroleum to our atmosphere.

I/. emand-Su!!ly Analysis 1. emand-Su!!ly (a! Erom the a!ove data* given the demand and supply for CM' in year .//<* the total demand for CM' per liter is a!out </ million and the total production of CM' is a!out 0A million liters of CM'. ,iving this situation* + arrive at a conclusion that demands for the CM' s not satisfied !y the total num!er of firms producing the product. 2. Target Market S$are CM' production reaches 0A million liters per annum according to $'D- (.//<). The processing plant that "ill !e esta!lished in Los 4a@os "ill propose the volume of production around /./67 out of the total volume of CM' !eing provided* since the target mar&et is just "ithin the province of Laguna. 5ut of the figure of supply provided * again* the possi!le supply of the commodity is can !e determine using assumptions primarily !ased on the e3isting data. -ear 2334-2335 2335-2336 2336-2313 2313-2311 2311-2312 2312-231& ..Su!!ly o# 0ME 1liters2 0A/*/// 0A/*/// 0A/*/// 0A/*/// 0A/*/// 0A/*/// 0oe##icient (6./.C.)N6 (6./.C.)N. (6./.C.)NB (6./.C.)NC (6./.C.)N0 (6./.C.)N; Total Su!!ly o# 0ME 1liters2 08C*/B;.// ;/A*C66.;< ;.B*6B0..B ;BA*.60.66 ;0B*;08.86 ;;8*C<A.CA

Ta!le C.The Supply of CM' (liters)in Laguna

G-ssuming that gro"th rate in the supply of CM' is ..C.7 (!ased from the estimated supply in .//; to .//<). GG-ssuming that the total supply of CM' to !e contri!uted !y the processing plant is /./67 (referring to the contri!ution "ith respect to the target location of mar&et* Laguna) from the total capacity production of 0A million.

/. Price Study

1. Price o# t$e 0ommodity Producing CM' incur additional cost since CM' cannot !e harnessed as is. Machineries* technology* la!or* ra" materials and chemicals are needed as inputs in producing the product. The price of coconut oil according to Asian and Pacific Coconut Community (.//<) has reached :SO .;IMT during .//0 and reached :SO B IMT in .//<. +ts price in the mar&et sho"ed an up"ard trend in July P Decem!er .//<. They also emphasi#ed that the price "ent up !y 0..;7 per month in the said period "ith an average of :SO 6*/6/ per MT. The price ranged from :S O86/ to :S O6*6CA (C+E ?otterdam). Dhile the production cost of CM' is a!out .8.</ Php per liter. Computing for the price of coconut oil per liter* the production cost for CM' "ill !e added to yield the price of the commodity. (+ have not found e3act prices of CM' that is prevailing in the mar&et) 2. 9es!onsi,eness o# emand to Price 0$anges Sources of alternative !iodiesel are the competing commodity of coconut oil9 some oils are e3tracted from jathropa* sugar cane* soy!ean* olive* corn* sunflo"er* etc. Lave other alternatives present in the mar&et* the demand for !iodisel for coconut therefore is dispersed depending on the preference of the consumer. +n ma&ing coconut oil competitive in the mar&et* it has to !e competitively priced in !oth the edi!le and non%edi!le mar&et (apccsec.org). +t is also stated that there "as increase in the domestic demand for edi!le uses of the coconut "hich sustain the price of coconut oil in the mar&et. These include the processing of coconut into CM' and !iofuel.

/I. Marketing Program 1. Marketing Programs