The US Department of Agriculture (USDA) has raised concerns about a potential shortage of biodiesel in the country, which could lead to higher pump prices. 

In a recent report, the USDA Foreign Agricultural Service (FAS) indicated that the supply of coco methyl ester (CME), a key component of biodiesel, has been dwindling locally due to increased exports of coconut oil (CNO). 

According to the USDA FAS, CNO producers are prioritizing foreign markets where they can command higher prices, resulting in a reduced domestic supply.

This situation has already driven up the cost of CME from P57 per liter in 2021 to between P90 and P95 per liter in 2024, consequently increasing biodiesel prices. 

To exacerbate matters, the USDA FAS forecasts a 15 percent decline in coconut oil production for the 2024/2025 marketing year, further limiting the availability of CME.

The Department of Energy has already mandated a gradual increase in the biodiesel blend in diesel fuel. 

Starting from Oct. 1, 2024, all diesel fuel must contain at least three percent CME (B3), an increase from the previous two percent (B2). 

Industry estimates indicated that this new mandate will significantly boost demand for biofuel, requiring an additional 450 million liters. 

The mandate will continue to rise, reaching four percent (B4) in October 2025 and five percent (B5) in October 2026.

“An estimated 900 million additional coconuts will be needed as feedstock to produce around 100-120 million liters (88,000-105,000 MT) of additional CME to satisfy a one percent mandatory increase in the CME blend,” the USDA FAS stated.

In response to the impending biodiesel feedstock shortage, the Philippine Coconut Authority (PCA) has outlined several potential solutions, including the need to expand coconut production areas, which currently span 3.6 million hectares with approximately 300 million trees. 

Revitalizing existing plantations through rehabilitation efforts is another key strategy cited by the PCA, as it can significantly boost coconut yields.

The PCA noted that the Philippines currently produces 15 billion coconuts annually. 

Of that total, two billion are allocated to CME production, 11 billion are exported as CNO, and the remaining two billion are consumed domestically. 

“Despite some of the programs mentioned to increase CME supply, fuel oil companies remain concerned that the current supply cannot sustainably meet the B3 blend mandate,” the USDA FAS said. 

“The CNO export market remains more lucrative, leading to unpredictability in sourcing CME,” it added.

On Sept. 30, D&L Industries, Inc., the parent company of the country’s largest biodiesel maker, Chemrez Technologies Inc., assured that it is prepared to repurpose its existing factory lines to cater to the higher biofuel demand in the country. 

Chemrez has also opened a new factory in Batangas.