Crisis in the Coconut industry – Growers’ viewpoint

The high price of edible coconuts is a cause for concern to the general public. This is attributed to the low production of nuts. However, production up to October shows an increase in production of 137 million nuts (6.5%) compared to last year.
The predicted harvest for the year ending December 2007 is expected to be around 2900 million nuts against 2600 million nuts in 2006.

The problem is compounded by the reduction in size of nuts harvested in Gampaha, Kurunegala and Puttalam which produce nearly two third of the coconuts in the country. During the worst months of the lean season, November, December and January edible nut market absorbs nearly 90% of the nuts harvested. The consumer demand is for nuts over the size of 13 inches in circumference.

When the media speaks of the nut price reaching Rs. 30.00/35.00 it is these nuts they are referring to.

In the selection process (sizing) anywhere up to 50% of the nuts do not meet this requirement. Nuts which do not meet this requirement are either sold as seconds or used for copra. This has aggravated the supply situation.

There was an upsurge in the farm gate price in November, reaching levels between Rs.18 to 21(averages 19.50). The price of nuts in Colombo and suburbs reached Rs. 30.00/35.00. The large difference may be due to the dealers having had to size the nuts. Further, under tight supply situation, high margins are kept by the middlemen.

The high price the grower got helped to cushion the loss in income due to lower production. When there was a similar shortage in 2002, the farm gate price was around Rs. 11.00. Though the present average price of Rs. 19.50 is 77% higher, in real terms, discounting for inflation, this amount is lower that the 2002 price.

It is much more pronounced when the inputs needed for production are considered. For example, diesel price which was Rs. 27.00 then, is now Rs. 75.00 an increase of 177% and fertilizer which was Rs. 15.00 then is now Rs. 45.00, an increase 200% likewise there has been a substantial increase in wages board payment to estate employees. These increases in operating costs since 2002 have to be absorbed into the farm gate price. By end of November with a view to easing out the coconut prices, the authorities have imposed some measures which are discussed below:

* Permit import of 30,000 tons of copra up to end of January 2008. The authority doesn’t yield to pressure from vested interests to relax restrictions on copra import. Import of copra should be strictly subject to rigorous inspection and fumigation at the Port as mentioned in the advertisement by the Coconut Development Authority.

* Permit the import of Coconut oil without import duty until end of January. It is important that what is imported is coconut oil and not Palm Kernel oil which is round US$ 200 (Rs. 22,000) per ton cheaper in the world market. The delaine given for zero should be strictly enforced.

* Suspend the export of fresh coconuts abroad. It is learnt that the ban is now lifted. It is important to preserve the fresh coconut export market, as the foreign exchange earned per nut during the last few years was nearly double that was earned by the desiccated coconut industry.

The enforced measures as described above have brought the farm gate price down to between Rs. 14 to 17 by December but this has not made a significant drop in the retail prices of nuts in Colombo and suburbs.

The intervention has only benefited the middlemen at the expense of the grower at a time his production is at a low level.

It is imperative that the authorities strictly adhere to the conditions and the deadlines of the enforced measures. By February the crops would pick up, and would be helped by good rainfall from September/December, and the nut sizes would be back to normal.

It is prudent during the intervening period that the authorities carry out the following measures to reduce the high margins of the middlemen and make available nuts cheaper to the consumer :

* Direct that all nuts produced by lands owned or managed by the government and other statutory bodies as well as the entire production from lands leased out to plantations companies all of which totals around 40,000 acres be supplied direct to the open market through mechanism created as done in 2002. Around 6 to 8 million nuts can be supplied monthly.

* In the long term carry out a campaign to reduce the wastage of fresh nuts by the consumer. It is a reality when anything is found in abundance and cheap it is wasted. Studies have shown that residents of Kurunegala district consume annually two and half times (a total of 150) nuts whereas in Badulla and Nuwara Eliya it is 60 nuts for the same consumption.

Given the world demand for organic oils and bio-diesel, the prices of coconut products have risen during 2007 by around 70% internationally and the prices in Sri Lanka is reflecting the world trend. If genuine coconut products are imported and not inferior substitutes, those steering the coconut industry will realize that, the market prices of imported products are only marginally different and quality wise the Sri Lankan product is much superior.

The edible coconut shortage during the worst of the lean season (November to January) is now a recurrent feature annually. Shortage for industrial use extends for a longer period.

In the long term, the solution to the current woes of the coconut industry is an increase in coconut production. This cannot be done unless the growers are given a remunerative price for their nuts thus ensuring a reasonable return on the capital value of their holdings. Some of the measures taken by the authorities it not strictly controlled might just do the opposite and cause irreversible damage to the industry.

(The writer was the president of the Coconut Growers Association of Sri Lanka during 2002-2004)