Prevailing drought and impact on coconut production, exports and prices
File picture: Coconut plantation
The prevailing drought is reported to be the worst experienced during the last four decades. Around two thirds of the coconut is grown in the two districts of Wayamba (Kurunegala and Puttalam) and Gampaha districts. These three districts are characterised by a rainfall pattern, which is bimodal.
Around two thirds of the annual rainfall occur during the inter monsoon months when the rainfall magnitude is high. The intensity and the distribution of the rainfall and the antecedent conditions of the soil matter and much of the rainfall volume is lost due to high surface runoff. Any rain falling during the intervening period in between the duration of the inter-monsoon helps to shorten the length of the dry spell and minimize its effect. For grass root level coconut growers the length of the dry spell matters a lot. The total annual rainfall is important but not the primary parameter.
Severe drought
In 2016 the inter-monsoon period rains during April/ May were relatively high and from mid-June onwards to the beginning of October there was around 100 days of dry spell.
Rains arrived in October but lasted only till the third week of November. From then onwards until now (end of March) there has been a dry spell interrupted by an occasional unseasonal rain caused by what meteorologists call a disturbance in the upper atmosphere.
Such a spell is reported to have occurred in most parts of the country in the fourth week of December, fourth week of February and second week of March. Except for the predominately coconut growing districts of Kurunegala, Puttalam and Gampaha the aggregate total of the magnitude of the rainfall in each of these periods did not exceed 50 mm (2 inches).
Therefore what we experience now in the predominately coconut growing districts is an unprecedented drought with one spell of around 140 days coming in the wake of the earlier dry spell of around 100 days with only six weeks of wet weather in between the two during 2016. Further during 2015 and 2014 there were long dry spells in the northern half of Puttalam and Kurunegala districts, which would cause a drastic drop in coconut production and reduction in nut size
Current shortfall in production
Most people attribute the shortfall in coconut production from December 2016 to March 2017 to the prevailing drought. This assumption is not wholly correct, as the nuts that are harvested during December to end of March were well set on the bunches by the time the drought spell commenced in November 2016.
The current shortfall is largely due to the first dry spell and the residual effect of occasional dry spells during the past two to three years, as the initiation of coconut fruit takes place around three years before it is harvested. The nut size and the husked weight is affected by both spells of drought and in addition, worsened by the Aceria Mite infestation, which thrives under drought conditions and results in affecting the nut production, size and weight.
Studies by researchers of the Coconut Research Institute reveal that the rise in day-time temperature, which usually accompanies drought months, hampers nut formation and subsequent yield. Growers are now reporting around 25 per cent drop in production for the first three months of 2017 compared to 2016 on lands located in Kurunegala, Puttalam and Gampaha, except around the mid-eastern quarter of Kurunegala district. In the affected areas, the husked weight per nut is around 500 grammes, estimated at a 10 per cent drop from previous years, affecting the price industrialists can pay to the grower and the potential export volume
Annual coconut production in 2016
and export performance
Despite the shortfall in coconut production during the period November to December 2016, the total annual coconut production estimated at around 3000 in 2016, appears to be only marginally less than the 2015 estimated production of 3050 million nuts.
The total volume of nuts used, using the standard conversion factors for the manufacture of export products, in 2016 was 892 million against 706 million in 2015. D.C. exports have increased from 36,131 Mt to 49,200 (36 per cent up), Virgin coconut oil from 13,353 Mt to 15,585 (17 per cent up) and coconut milk from 21,957 Mt to 30,433 Mt (38 per cent up) in 2016 from 2015.
Export earnings have gone up 13 per cent from Rs. 75,259 to 84,701 million during the year, despite lower unit FOB prices.
Higher earnings are partly due to the depreciation of the Rupee, nonetheless during 2016; the earnings in US dollar terms have gone up by 5 per cent to $581 million from $553 million.
This is noteworthy as the country’s gross export earnings in $ terms are reported to have dropped around 2 per cent from 2015 to 2016. The export earnings of coconut products are around 20 per cent of the total foreign exchange earnings from agricultural exports. Despite this performance, there were moves from around October 2016 to import coconuts and kernel products from neighbouring coconut-producing countries to be used by the local industry overlooking threats of diseases and pests rampant in the those countries and a disincentive to growers.
It needs to be pointed out that 30 million fresh nuts were exported from Sri lanka in 2016 at a yearly average FOB price of Rs 71.00 per nut (Sri Lanka Customs figures, as given in COCO Focus December Report) and the income derived per nut of fresh nut of export surpasses the price derived per nut from other value added exports.
Yearly average FOB price for virgin coconut is Rs. 53 and desiccated coconut Rs. 39. When fresh-husked nuts are exported, the shell and the coconut water is lost but the value of these at current prices is around Rs. 3 per nut.
An additional value addition of around 20 per cent of the price of finished product is derived through the bi-products of the manufactured exports using kernel. A balanced approach may be for fresh nut exports to be curtailed during the lean cropping season by higher export duty, not fully suspended so that foreign markets/buyers are not fully lost.
The Minister of Plantation Industries needs to be commended for the stand taken by him not to permit fresh nut imports but instead increasing the import duty of edible oil including palm oil and imposing an export duty of Rs. 15 per fresh nut export and agreeing for coconut kernel imports with controls, in discussion with representatives of coconut growers.
The minister’s stand has been vindicated by the fact that the export volumes of coconut products and earnings have not dropped in November and December 2016.
Over the last 10 years, Sri Lanka has made much headway in manufacturing and exporting a multiplicity of products, thanks to the pioneering efforts of the processing industry. Prior to this period, Sri Lanka depended on export of coconut oil and later Desiccated Coconut (DC) which came into the fore around 6-7 decades back and helped in a large value addition. Most of these industrialists have in the recent past ventured into producing other value added products like virgin coconut oil, coconut milk, spray dried milk, etc and exporting coconut water.
Most of the innovations to produce these varied products have come from those engaged in DC production, in particular the market leaders. The combined export earnings from the alternate products and the nuts used exceeded those of DC exports in 2016. Nonetheless the future potential of DC should not be ignored given the fact that the prejudices based on health grounds no longer exist. We need to venture out on value added products using DC.
Measures to mitigate the drought
Due to the two spells of drought described above in 2016 and now extending upto the first weeks of April, a grave shortfall of nut yield and a marked reduction of kernel weight per nut is to be expected throughout 2017.
This would drastically affect the industrial needs, exports and the price local consumers pay. To keep down the large margins kept by middlemen some form of intervention as done in the past is needed. To mitigate the effect of drought, a concerted effort is needed from the coconut growers, and the state agencies entrusted with the development, cultivation, research and management of state coconut lands (20,000 acres) and industry. Sadly at the grass root level, there is no evidence that the effective mitigation measures are taking place responding to the desperate situation except a few exceptions. Though much of these measures need to be done prior to the onset of rains expected in April /May. Or along with early inter monsoonal rains. The mitigation measures need to be in two phases: short term and long term.
The short term needs to be (in the order of importance); (a) husk burial to conserve expected rains (b) mulching round the stand up to 6 ft. from bole, (c) water harvesting by constructing large size pits (pathaha), (d) controlled slashing of weeds, and (e) fertilizing with organic and chemical fertilizer.
Long term measures; (a) constructing deep tube wells penetrating the fractured rock underneath and providing irrigation during the dry season, (b) planting agro forestry and fruit tress keeping them well pruned and trimmed at low heights. Shade helps to conserve soil moisture and transpiration and the cooling effect minimize the surrounding temperature.
Prospects of future targets
The target of the authorities is to increase export income from $550 million in 2016 to reach $1 billion by 2020 and the annual coconut production to reach 3600 million. This is highly ambitious given the short term and perhaps the long term effects of drought, unprecedented efforts are needed from the three main state agencies, coconut growers, on state-leased lands (20,000 acres) and manufacturers. The mitigation measures need to be put in place right now at a vigorous pace. Only then we could mitigate the resultant effect of drought. Failure to do so would affect the retail price of coconut paid by the local consumer, affect our exports of multiple products that has come into the fore during the last few years and the markets built up under severe competition and drive and interested parties to canvass for imports of coconuts with drastic long term consequences circumventing the Plant Protection Act, due to high escalation of prices of coconuts and high demand in coconut-producing countries. This is a short-sighted policy, which would undermine the entire coconut industry in the country and foreign exchange earning potential.
(The writer was past president, Coconut Growers Association 2002/2004 and a chartered (civil) engineer)