The present plight of the coconut industry and remedial measures

Denzil Aponso

No other industry other than coconut plays such a dominant role in the rural economic structure and the upliftment of the living standards of the people in the North Western Province (Wayaba) and Gampaha District, and to a lesser extent in the Districts of Colombo, Kalutara and Hambantota.

There are 700000 coconut small holdings in the country, serving about 3 million persons. For around half of whom, coconut is the major source of income and livelihood. Currently the coconut growers have problems worst experienced since the year 2000 with respect to obtaining a remunerative price for coconuts and obtaining fertiliser at competitive price, yet the national budget for the year 2009 presented on 7 November 2008 did not speak a word about the coconut industry, and as far as coconut is concerned, the lack of any proposal to address the current crisis negates the claim that the emphasis of the budget is to promote local agriculture.

In the coconut triangle, the farm gate price has been coming down from a high of Rs 25.00 at the beginning of the year to around Rs 13.00 per nut currently (November 2008).

In the North Western Province ( Wayamba), which produces nearly half of the annual production of coconuts in the country, the Traders offer the unorganised smallholder Rs 12.00 per nut as at the third week of November and are hesitant to buy nuts expecting further reduction in price.

The 50% drop in the farm gate price during the course of the year is occurring at a time when the price of all other commodities and the cost of living index has escalated to around 25 %, according to official sources during the same period.

Coconut stockpiles have built up with the Traders. On some coconut Estates, coconuts contracted for sale at the Colombo Auctions some two to three months back have not been removed for industrial usage. Some of the coconuts have begun to germinate. It is estimated that around 25 million mature coconuts are in stockpiles.

The international market price of desiccated coconut has plummeted and so is the Colombo market price of D.C. over production of D.C. could only drag the price down further.

Under this circumstance the only alternative is to channel these nuts for the manufacture of coconut oil. Such manufacture is not economically viable with the glut of imported palm oil imports.

Palm oil is continued to be imported at 15 % import duty, without any limitation on the volumes imported. This is despite the slogan Api Wawamu, rata nagamu. The Palm oil price which was 1200 U.S. Dollars per ton in June 2008 has continued to come down and has now (20 November) plummeted to 490 U.S. Dollars (19 November) in the producing countries (Malaysia and Indonesia). Helped by low producer prices and import tariff, palm oil Importers have stocked palm oil to last 2 to 3 months of the country's requirement.

Nearly 90 % of the palm oil imported is technically termed palm olein, which is obtained from the outer skin of the palm fruit (husk) and thereafter refined, bleached and deoderised using chemical agents, referred to in the industry as R.B.D, in contrast to coconut oil which is obtained by pressing the dried kernel with no additives and could be considered organic, an attribute for which the western world is paying a premium price.

The local small time coconut oil Mills spread in every village in Wayamba and Gampaha District have either closed down or are running at low capacity, and persons thrown out of employment. Palm oil is adulterated with coconut oil and is sold as coconut oil and is marketed even in the villages of the coconut triangle, and as vegetable oil in the cities.

At least the palm oil should be labeled and sold as palm oil without misleading the gullible consumer. The officials have given a deaf ear to the request of the Coconut Growers through their organised body to ban imports of palm oil up to end of December and to impose high surcharge cess on imported palm oil from January 2009 to be lifted when international palm oil price recover. The present policy on palm oil is not helping any body in the country.

Sri Lankan Desiccated coconut and white copra which is normally exported at a premium price compared to other countries are now sold at lower price than other producing countries.

Growers fertilise their lands during October to December. This year, most growers have given up fertilising.

The fertiliser price which was Rs 900.00 per 50 Kg bag of Adult Palm Mixture (APM) in the year 2006 rose to Rs 1450.00 per 50 Kg bag in the year 2007.

In the fourth quarter of year 2008, the fertiliser price has risen to Rs 3200.00 per Kg bag, if obtained from the Coconut Cultivation Board (CCB) compared to Rs 4600.00 per 50 Kg bag from the Fertiliser Companies.

The difference of Rs 1400.00 in price, is partly due to a subsidy of Rs 500 per 50 kg bag, by the use of Cess funds derived from the exports of coconut products and the balance due to laudable economies made by CCB, by purchasing directly from the importers, and transport to regional stores in CCB's own limited number of lorries.

In the year 2007, fertilising season, a coconut Grower needed 4 nuts at an average price of Rs 23.00 per nut to buy 3 Kg of APM fertiliser.

Today, at the farm gate price of a nut at Rs 13.00 the Grower needs 15 nuts. When the cost of Dolomite, transport and fertilising costs are added, requirement rises to 17 nuts. It is only with the income derived from the balance, the grower can get a profit and attend to other cultural practices needed to arrest the declining soil fertility, conserve moisture and replanting needs and provide security. The neglect of these will eventually spell disaster for the coconut industry in the coming years.

For the paddy farmer, Urea and other fertilisers, given at Rs 350.00 per 50 kg bag, carries a 95 % subsidy. The Tea Smallholder is to be given fertiliser at Rs 1000.00 per 50 kg bag.

For the coconut grower fertiliser is given at Rs 3200.00 per bag, if he is lucky to get it from CCB. Nonetheless, subsidised fertiliser is often not available for issue.

The price at the fertiliser dealer is Rs 4,600.00 per bag of adult palm mixture. In India, irrespective of the crop they grow, a 50 kg bag of fertiliser is given at Rs 900.00 (Sri Lankan rupees). The coconut Grower needs to be given at least a 50% subsidy to encourage him to apply fertiliser.

Though the price of coconuts at the farm gate has dropped down to Rs 13.00 per nut, the coconuts in the city centres are continued to be sold at around Rs 28.00 for a medium size nut, due to the manipulation of the middle men.

There needs to be mechanism to bring down the large margin in price between the Grower and the consumer. Consumer price can be made reasonable by channeling the nuts produced by government owned coconut lands numbering a total of around 40,000 acres, which can supply nuts, around 8 million a month to the city Centres and Cooperatives at least during the week ends, during the lean cropping season.

This will have a ripple effect on bringing down the price paid by the consumer, so that despite a remunerative price for the Grower, the consumer pays a reasonable price.

Nonetheless, coconuts remain the only commodity for which the consumer is paying 25 to 40% less than the price they paid at the beginning of the year.

* Immediate ban of import of palm oil up to December 31 2008.

Sufficient stocks of imported palm oil are available to last for the two month period.

This will enable the coconut oil Miller to come on stream using the nuts that are in stock with the Traders and coconut Estates who are holding nuts for the prices to recover.

Import Surcharge Cess is imposed so that the price ex-Colombo Port is at a level to enable the coconut oil Producer to pay the Grower a minimum supply price of Rs 20.00 per nut.

* Payment of an Export Credit to the D.C. Millers

At the present Colombo Market price of D.C. it is not possible for the D.C. Miller to function economically when the price of a coconut is Rs 20.00.

To enable them to continue production and to prevent the loss of foreign markets, it is prudent to pay them an export credit based on the difference between the cost of production per Kg of D.C. produced and the Colombo Market price of D.C. It is only a fraction of large amount of money accrued from Import Surcharge Cess that is needed to execute this.

This is to be done using the funds derived Import Surcharge Cess. Device a method to financially support those who apply organic manure, so that it can be an incentive for more growers to get into organic farming and to wean them away from chemical fertiliser.

Institute a mechanism too supply edible nuts to City Centres at a reasonable price.

This has been done successfully in the past, and helped to bring down large margins kept by middlemen.

(The writer was the President of the Coconut Growers Association of Sri Lanka from 2001 to 2003)