FIBER MARKET REPORT
(January to March 2010)
- By District / Region
Baling performance of abaca fiber during the first quarter of the current year failed to keep pace with that of the same period last year although on a month to month basis, baling has been improving since the start of the year. Aggregate baling of abaca fiber dropped by 17.8% to 12,802 mt in the first quarter of 2010 compared to a year-ago level of 15,576 mt as outputs of all abaca-producing regions were on the downswing with the exception of Zamboanga Peninsula. Eastern Visayas, the second top abaca-producing region, had the biggest contraction in baling in real terms. The common reason for the downtrend was the price issue as farmers kept on comparing the price they received in the past with what they are being paid for which they considered relatively low.
Despite the fall in baling of Bicol, it still emerged as the premier producer during the first quarter, contributing 38.2% to the overall output compared to only 33.9% posted in the same period a year ago. Eastern Visayas had 26.2% share while Davao Region accounted for 9.0% of the total baling. Caraga dislodged the Autonomous Region of Muslim Mindanao (ARMM) as the fourth biggest abaca-producing region with 7.5% share to the aggregate baling in the first quarter of this year.
In Bicol, baling declined although there were abundant abaca plants ready for harvesting with the full recovery of the farms damaged by super typhoons in 2006. The 7.4% shortfall in baling, however, was the least contraction recorded among the abaca-producing regions. Most of the abaca farmers have temporarily shifted to the production of other crops reportedly due to the declining buying prices in the region. This brought the region’s baling to slid to 4,893 mt in the first three months of the current year from the 5,285 mt recorded in the same period in 2009. Of this total output, 123 mt were decorticated abaca fibers that will be processed into pulp for the manufacture of specialty papers. Baling of Catanduanes, Camarines Sur and Sorsogon went down during the period under study while Camarines Norte had no record of baling. Only Albay had increased output this quarter. The top abaca grades baled in the region comprised of G, S2 and I. In contrast to the region’s baling performance, purchases for local consumption and the export market rebounded as all industry sectors increased their procurement levels during the reference period. The pulp sector’s operations were better this quarter than in the same period a year ago while cordage manufacturers issued more purchase orders for the supply of fiber. In the fibercraft sector, situation differed per company. There were some who were optimistic because they have new foreign buyers while others complained of the lack of orders from abroad. For the region’s fiber exports, the United Kingdom, China and Japan, the primary destinations, stepped up their importation with the majority of the grades traded comprised of S2, G and JK. While there was brisk buying of all industry sectors, prices weakened because, according to some processors, they had to lower their buying price to reduce production cost in order to make their products competitive in the world market.
While disease infestation kept on adversely affecting abaca fiber production in Eastern Visayas, efforts to enhance production are underway with the continued disease eradication activities led by FIDA in collaboration with the local government units and the farmers themselves. Another issue that led to the slump in baling was that some farmers were still reluctant to harvest and strip abaca fiber because they were expecting buying price to still go up to 2008 level. There were also reports of sluggish market as purchases in the region for local consumption and exports were down. On the other hand, for very high grade abaca particularly for “tinagak” making, sinamay weavers complained of the lack of supply prompting them to source those from the Bicol Region. Leyte and Biliran had increased output but the rest of the producing provinces had dismal baling performance with Southern Leyte and Samar posting the biggest reduction. With this scenario, the region’s overall baling declined by 21.9% to 3,357 mt vis-à-vis last year’s level of 4,300 mt.
All the abaca-producing provinces in Davao Region had deficit in their respective balings as many farmers were discouraged to strip more fibers reportedly due to big reduction in buying prices. There were exporters who claimed of the very slow movement of their stock inventory preventing them to offer high prices. Meanwhile, purchases of local processors in the region were on the downtrend as the sole cordage manufacturer in the region temporarily stopped operating in the absence of order from foreign buyer. Some suppliers/local traders have also reduced production capacity/volume of fiber being traded as their buyers set limits on the quantities for deliveries. They qualified, however, that should a big order come, they have the quantity to deliver. On the other hand, the region’s fiber exports showed improvement but these were previous commitments, only that the shipments were re-scheduled. Davao Region’s baling fell short by 37.9% to 1,150 mt in the current quarter with Davao Oriental posting the biggest drop, quantity-wise. This baling figure included the 11 mt of decorticated abaca produced from Davao Oriental.
The combined bleak baling performance of Surigao del Sur, Surigao del Norte and Agusan del Norte resulted in the shortfall of the overall output of Caraga to only 964 mt in the first quarter of the year. This was 10.5% lesser than the 1,076 mt recorded in the same period of 2009 with the farmers’ complaining of the lowering of buying prices. Meanwhile, the significant drop in baling of Sulu resulted in the plunge in aggregate output of ARMM. Both Lanao del Sur and Maguindanao have positive growth rates but these failed to offset the reduction in baling of Sulu, the region’s top abaca producer. Abaca fibers from Lanao del Sur were mostly machine stripped high grades which have more demand than the lower ones. It was reported that a grading and baling establishment in Sulu and the other one operating in Zamboanga City but also buying in Sulu had temporarily closed shop. ARMM had total baling of 872 mt including the 32 mt of decorticated fiber. This figure was 22.8% lower than the 1,130 mt recorded in the previous year on account of the lower price offered by buyers and the fewer number of active traders compared in the past years.
Northern Mindanao and SOCCSKSARGEN had the same downtrend in baling during the reference period. In Northern Mindanao, all producing provinces posted cuts in their respective outputs bringing the region’s baling to contract by 8.9% to 618 mt in January to March 2010 vis-à-vis the 679 mt registered in the same period a year earlier. It was reported that these provinces produced lower grades abaca which had limited demand at the moment. Likewise, there was no report from the region of fiber disposals for the export market and fibercraft makers but shipments to pulp and cordage manufacturers had increased. Meanwhile, in SOCCSKSARGEN, the hefty drop in the output of South Cotabato brought the region’s total baling to slump to 194 mt, representing a reduction of 43.5% during the period under review. This was the highest rate of decrease registered by any of the abaca-producing regions.
Outputs of Western and Central Visayas posted double-digit contraction corresponding to 20.2% and 32.3% during the comparative period. In Western Visayas, all producing provinces, with the exception of Capiz, had reduced baling which could be attributed to the low buying price offered by traders which was reduced by almost half compared to last year’s level. Accordingly, however, traders could not give better price as the bulk of the fibers were of lower grades because more farmers chose to strip them because they said that these are easier to extract than the higher grades. Thus, output of the region fell to 525 mt in the first quarter of the current year. In Central Visayas, the hefty decline in the output of Negros Oriental and no record of baling of Bohol resulted in the overall drop to 87 mt in the first quarter of 2010. Negros Oriental experienced extreme heat due to El Niño, hence, farmers limited their production activities to mulching and watering of newly planted abaca. The majority of the abaca fiber produced in the province was “bitool” which is used for loom weaving of sinamay. The rest was composed of lower grades and sold to grading and baling establishments based in Leyte and Iloilo.
Among the producing regions, Southern Tagalog had the lowest baling at only 15 mt in the first three months of the current year. Only Marinduque recorded a positive growth rate but the volume was a mere seven metric tons. Meanwhile, Zamboanga Peninsula was the only region with an increase in baling in the first quarter of 2010 compared to same period a year ago. The rise in the output of Zamboanga del Sur coupled with the resumption in baling of Zamboanga Sibugay boosted the region’s aggregate output to 126 mt in the first quarter of the current year including the 31 mt of decorticated abaca.
- By Grade
Outputs of JK, OT and AD-3 moved upward while the rest of the grades recorded downtrend in baling. JK increased the most in absolute terms by 130 mt bringing the total to 1,738 mt. More farmers were reportedly stripping JK because the extraction of which is less strenuous compared to high grades. From among the grades with negative growth rates, M1 posted the highest rate of reduction at 44.7% reaching 122 mt. Despite the decline in baling, S2 was still the top grade baled followed by G with corresponding total of 3,358 mt and 2,789 mt.
The major grades, comprising of S2, I, G and JK had aggregate baling of 10,561 mt, down by 17.0% from the previous year’s figure of 12,719 mt. Its share to overall baling, however, improved slightly to 82.5% in the first quarter this year compared to the 81.7% recorded in the same period a year earlier.
- By Method of Extraction
From January to March this year, baling of hand-stripped abaca totaled 11,143 mt representing 87.0% of the total. Baled spindle-stripped fiber reached 1,462 mt, contributing 11.4% to aggregate output while the decorticated ones was 197 mt. The bulk of the hand-stripped fiber came from the Bicol Region while the major sources of spindle-stripped were Eastern Visayas, Caraga and ARMM. The decorticated abaca was largely produced in Bicol, Zamboanga Peninsula, ARMM and Davao Region.
- By Sector
Parallel to the baling performance, the first three months of the year saw a general batement in abaca trading with local processors compared to the same period last year. Aggregate purchases from January to March this year reached 10,184 mt, 18.2% lesser than the previous level of 12,446 mt. The diminished volume was the result of the reduced purchases of pulp millers and fibercraft processors at 23.4% and 23.8%, respectively. The pulp sector was the leading buyer with purchases reaching 8,893 mt accounting for 87.3% of aggregate domestic turnover in the first quarter of the year. The fibercraft makers, on the other hand, bought 183 mt or 1.8% of the total domestic sales. Some fibercraft makers had reportedly stopped exporting due to lack of orders because of the recession, thus, turned to other business ventures. There were others, however, who were able to find new foreign buyers.
Only the cordage manufacturers posted an upsurge in their procurement level at a high rate of 84.7% during the comparative period. The sector purchased 1,108 mt compared to the 600 mt procured from January to March 2009 as some cordage firms have resumed normal operations while others had to meet orders of new foreign buyers.
- By Grade/By Sector
The slump in the fiber purchases of the pulpers was very evident in the majority of the grades, especially the major ones. There was a significant reduction in their buying of G (1,488 mt) and Y (159 mt) but more of the decorticated abaca, H and OT. The bulk of the grades bought by the sector comprised of S2 (2,791 mt), I (2,390 mt) JK (1,165 mt) and G, the aggregate of which accounted for 88.1% of the total sales to them.
Likewise, the shortfall in the purchasing level of the fibercraft processors was noted in JK and T/OT during the period under review which totaled only 11 mt and 51 mt, respectively. The sector also bought S2 and G at increased rate with corresponding total of 111 mt and 10 mt.
For the cordage sector, fiber procurement surged especially for cordage grades, S3 (398 mt), H (306 mt) and M1 (213 mt), posting three-digit increment during the reference period. This represented 82.8% of the total purchases made by the sector during the three-month period this year.
- By Country of Destination
At the start of the year, the export market for abaca fiber showed a sign of recovery with the escalation in the quantity of fiber shipment to the country’s trading partners. The export market which weakened beginning in the last quarter of 2008 as an aftermath of the global financial crisis, rebounded by about four times this first three months vis-à-vis the same months of last year. Foreign trade expanded to 2,886 mt with shipments to the United Kingdom, Japan and China posting three-digit growth. A total of 1,621 mt or 56.2% of the Philippine fiber exports went to the United Kingdom. Exports to Japan soared to 822 mt this year from a measly 197 mt traded a year earlier while China imported 363 mt this year making it the third biggest importer. The combined increments in the importation of these three countries more than compensated for the shortfall in the trade with traditional buyers from Indonesia and African countries.
- By Grade
Except for I and M1, exports of all grades surged, with G posting a four-digit increase, the highest rate recorded during the comparative period. Shipment of G in the first three months of the year totaled 1,351 mt, way above the 81 mt exported a year ago. With this, G was the top grade traded this year, surpassing foreign sales of JK which was the chief export in January to March last year. Foreign shipments of S2 and S3 also improved, sales of which reached 590 mt and 203 mt, in that order. Exports of JK likewise stepped up totaling 567 mt, almost two times more than the previous year’s level.
During the first quarter of the year, all of grade G went to the United Kingdom while a greater percentage of S2 and JK were absorbed by China and Japan, respectively.
Aggregate revenues generated from the exports of abaca fiber in the first three months of the year reached US$3.4 million.
Average buying prices at the grading and baling establishments continued to soften in March 2010 compared to the price levels in the same month in 2009. This was the primary factor that hindered farmers to intensify their fiber production. On the average, prices slipped by 34.5% for hand-stripped and 42.1% for spindle-stripped during the period under review.
Except for hand-stripped residual grades, the highest decline in the average buying price was recorded by S3 at 39.8% while the lowest reduction was posted by JK at 10.5%. For spindle-stripped grades, except for the residual ones, M1 had the highest price cut at 41.4% while average price of JK softened the least at 2.8% in March 2010 compared to March 2009.
G, which was the top grade exported during the first three months of the year, was priced lower by 33.5% for hand-stripped and 26.4% for spindle-stripped. On the other hand, S2, the most traded grade with domestic processors throughout the first quarter of 2010, registered rates of decline of 28.3% (hand-stripped) and 25.9% (spindle-stripped) in March this year vis-à-vis same month last year.