Right of Reply: “From Tradition to Transformation”

The Coconut Growers’ Association of Sri Lanka (CGASL), an Associate Member of the International Coconut Community has sent the following correction to the article “From Tradition to Transformation: Sri Lanka’s coconut export revolution “written by Randeewa Malalasooriya, President Coconut Milk Manufacturers’ Association (CMA) and published in the DailyFT of 3 November 2023 https://www.ft.lk/agriculture/From-tradition-to-transformation-Sri-Lanka-s-coconutexport-revolution/31-754800.

The article has many data errors and has no reference to the source of information. The current information of the coconut industry is given below with the source of information.

Current data of coconut Industry.

The total area under coconut cultivation is 1,095,982 acres. The estate sector 178,675 acres (16.3%), smallholdings - 917,307 acres (83.7%). Total nut production 3,391.36 million, household fresh nut consumption is 1,848.08 (54%), and used by Industry - 1,543.28 (46%). (as per 2022 data from  Central Bank of Sri Lanka, Department of Census & Statistics, Coconut Cultivation Board, Coconut Development Authority)

Coconut export data 2022

Value of coconut exports is Rs. 262,934 million, ($ 817 m). Half of the earnings are from kernel products.

The market share of products exported in value: Desiccated coconut - 23.5%, coconut milk - 22%, Virgin coconut oil - 15.5%, coconut milk powder -10.27%, and coconut cream 8.8%.

In 2022, 52,765 MT of coconut milk was exported using 220 million nuts which is 14.25% of the industries utilisation bringing in a revenue of $ 90 million at an average price of $ 1,571 per MT. (However, the price indicated for coconut milk is $ 2,000 per MT in the said article)

The export value for coconut milk was $ 90 million in 2022, hence, to increase it to $ 480 million (533% increase) as projected by the CMA would be a tremendous challenge. In fact, there has been a reduction in exports by 1% and of price from $ 1,922 per MT to $ 1,571 YOY from 2021.

Export market trends

Sri Lanka market share of manufactured coconut kernel products vary with the competition from other major producers such as, India, the Philippines, Indonesia, as per the product and its demand and supply. Therefore, to rely and align on a single product in the manufacture of coconut milk for export is not a prudent strategy according to current trends articulated below. 

Desiccated coconut (DC) prices showed a decreasing trend throughout 2022, with prices in the Philippines, Indonesia, and Sri Lanka experiencing drops. In February 2022, the price of DC in the Philippines was at its highest for the year, reaching $2,721/MT, but by January 2023, it decreased  to $1,874/MT. Similarly, in Indonesia and Sri Lanka, prices decreased by 29% and 21%, respectively, over the last 12 months.

One factor that may have contributed to the decreasing trend in DC prices is the high inflation rate in several European countries and the USA. This could have reduced consumer purchasing power, leading to a decrease in demand for coconut products, including desiccated coconut. Additionally, an expected economic slowdown in the coming year could also be a contributing factor.

The price of coconut oil plunged from $2,064/MT in April 2022 to $1,155/ MT in December 2022 or a fall by 79%. Similarly, the price of palm kernel oil showed the same pattern. The price of the oil fell deeply from $2,441/ MT in April 2022 to $1,067/MT or a decrease by more than half within 8 months. However, lower prices brought about a hike in the demand. Subsequent to the shock experienced due to the pandemic and the Russia-Ukraine war, global demand for the oils upturned. The increase in shipments of coconut oil was mainly supported by lower prices and higher supply. (Source ICC market review).

Country’s edible oil consumption

Sri Lanka consumes 264,000 MT of edible oil. Local manufacture is 44,000 MT (21,120 MT coconut, 23,760 MT palm oil) with an import of 220,000 MT. Household demand is 166,000MT, and industrial demand, 98,000 MT. The value of edible oil imports is estimated at $ 184 million at the current market price.

The coconut milk manufacturers suggest that coconut oil be imported instead of manufacturing it locally and the nuts utilised for coconut milk processing for export. The quantity of coconut oil produced locally is 21,120 MT utilising 211 million nuts, produced by smallholders at village level.

Traditional coconut oil millers

There are approximately 2,500 small to medium size coconut oil mills that provide employment in the rural sector, operated as a cottage industry, forming part of the rural fabric.

Importing coconut oil to replace this quantity of coconut oil manufactured locally would have a tremendous impact on the rural economy. 

Facilitating traditional millers to reach global Virgin Coconut Oil (VCO) and lauric acid value chains would assure their competitiveness while rewarding the village coconut growers with a reasonable price by way of value addition.

The coconut industry is directly influenced by edible oil importation.

Coconut production varies monthly with higher yield from March to August, and lower crop from September to February. The annual rainfall has the greatest impact on nut production. The growers’ harvest is consumed domestically, and excess nuts converted to oil or sold to industries.

When imported edible oil is released to the market during the period March to August there is a drastic reduction in the local oil market and farm gate price of coconuts, below the cost of production, resulting in home garden producers neglecting to carry out required agricultural practices to improve yield.

The productivity of plantation would not improve unless a sustainable farm gate price is maintained throughout the year. The growers are not entitled to any government subsidies for agricultural inputs.

Sri Lanka coconut unique in quality

Sri Lanka’s coconut products enjoy export demand and a competitive advantage due to the kernel’s unique taste, fat content and colour, and therefore, command a high brand value. Similarly, king coconuts, and coconut bristle fibre have created niche markets.

Imported raw material substitution for industrial use would have a negative impact on brand value and the potential for earning foreign exchange would be low. 

The EU and other importing countries have implemented a farm-to-fork approach to food safety, meaning that the entire food chain is subject to regulation. It requires food businesses to take necessary precautions to ensure the safety, integrity, and quality of food products throughout the chain.

This includes the registration of food businesses and the traceability of food products, as well as the premarket registration of certain regulated products such as food additives, food enzymes, and genetically modified food. The food chain begins with the production, processing, storage, and transport of food products, and ends with the preparation, distribution, and consumption of food.

If Sri Lanka coconut kernel manufacturers wish to retain market share, they have to comply with such regulations to improve market share among the competitors.

The Milk Manufacturers’ Association also suggests the import of coconuts to the country. CGASL is of the view they have not acquainted themselves with the laws of the land, for reference: 

According to the Plant Protection Ordinance No. 165/2, November 1981, 

https://stepbysteptrade.lk/media/Extraordinary-gazette-1981, no plant shall be imported to Sri Lanka, except under the authority and in accordance with the conditions of a Plant Importation Permit issued by the Director General, Department of Agriculture. This Ordinance covers Cocos the Coconut and related plants also.

Strategy to improve productivity of coconut lands

The Coconut Growers’ Association is very mindful of the responsibility to improve export earnings from $ 817 to $ 2,000 in a sustainable manner and empower the 70% of the stakeholder population of nearly one million grower families and increase coconut productivity and their income.

The current coconut production in SL is 7,000 nuts per hectare, while India produces 12,000 nuts per 

hectare. Hence, the objective is to increase productivity with innovation and investment in the coconut growing sector. The investment could generate 3.3 billion additional nuts in the present extent of land under coconut production from the second year of investment.

The Coconut Growers’ Association in collaboration with the Agriculture & Plantation Industries Ministry, implementing agencies, Coconut Cultivation Board, Coconut Research Institute completed a strategic plan for this investment. The first phase of the investment is to improve soil moisture and soil fertility in the existing plantation.

The President in his address to the Coconut Growers’ Association on 4 August 2023 reiterated:

“The Government has already initiated an agriculture modernisation program with the aim of creating a highly competitive economy through agriculture. To achieve this, we must also focus on advancing the coconut industry. Increasing coconut production and marketing it effectively is crucial. Relying solely on price control will not lead to successful business development. Instead, the key lies in boosting production and enhancing the value of coconuts.”

The Coconut Milk Manufacturers’ Association should align their strategies in line with the availability of raw materials and engage with grower communities to improve coconut productivity. India, Indonesia, the Philippines, and small island nations like Fiji have invested with the growers and the supply chain to ensure a regular supply of coconut as per the market demand. All agriculture-based industries need to adopt a bottom-up approach by supporting the increase of raw materials to be sustainable in the long run and not disrupt supply chains, this is more so given the commodity is the second staple in the country and is a vital ingredient in the daily food intake, and food security of the nation.

Coconut also supports the rural economy, being the main crop in a farming system that includes animal husbandry, fruit cultivation, and spices. All stakeholders in the coconut industry should support improving productivity to ensure that the grower obtains a sustainable farm gate price while the consumer too benefits with a reasonable price with efficient supply chain management.