COCONUT REVIVAL IN MALAYSIA

COCOBUT PLANTATION in Malaysia are the fourth important commodities in Malaysia after Oil Palm, Rubber and Paddy. Coconut (Cocos nucifera) mostly grown by smallholders especially on the coastal land area. However from my observation it is time for the local coconut industry to shine because it was having been overshadowed by oil palm for decades. This is being driven by declining palm oil prices and rising demand for coconut-derived products. But there are many challenges. For one, the local coconuts cannot compete with imports in terms of price and scale. According to news reports earlier this year, local coconut suppliers were calling for the government to regulate the import of coconuts. In their view, the influx of cheap coconuts from countries such as Thailand and Indonesia was hampering their businesses. The lack of competitiveness and perceived insufficient supply is due to many farmers choosing to plant the more lucrative oil palm instead of coconut trees. This article in the blog "Anim Agriculture Technology" discuss about coconut revival in Malaysia as reorted by local media recently.

Coconuts are Malaysia’s fourth largest industrial crop behind oil palm, rubber and rice with most of the plantations found in Sabah and Sarawak. According to a report by the expert in Department of Agriculture Reports, the country is among the top 10 coconut producers in the world, although production fell between 2014 and 2016. Total acreage of coconut plantations had fallen from about 120,000ha in 2005 to 85,000ha recently, says Abdul Shukor. Meanwhile, palm oil prices rose from 2006 to 2012. Then, prices went on a general downward trend (except for a spike in 2017) due to oversupply and weak demand from top buying nations. Recently, prices were impacted by the EU’s decision to avoid palm oil due to concerns of forest clearing and environmental degradation directly linked to oil palm cultivation. This had serious consequences as the region was the world’s second largest importer of palm oil. The declining palm oil prices have caused smallholders to suffer a lot, especially those who only have 1ha to 2ha of land. On the other hand, coconuts are becoming popular as prices have gone up. It is an emerging industry and the demand is growing because 10 to 20 years ago, we mainly used the crop to produce coconut oil. Today, in addition to virgin coconut oil, it is used to produce fresh coconut milk, drinks and powder.

The current supply of coconuts is unable to meet local demand. According to Department of Agriculture calculations, 100 million to 220 million coconuts need to be imported annually, especially during festive seasons. The problem with the coconut industry at this moment is that the farmers are still using the old variety, Malayan Tall. But the production yield is not that good. This variety produces 6,000 to 10,000 nuts per hectare per year. The Malayan Tall also takes a long time to grow and its height makes it difficult to harvest, he adds. Meanwhile the better varieties of coconut seedlings already exist in the market. These are developed by Mardi and the Department of Agriculture. Companies such as United Plantations Bhd have their own variety known as MATAG (CN13, CN14 and CN15 registration code in which not many farmers can buy. For me as coconut expert in Malaysia also have the Malayan Yellow Dwarf, Malayan Red Dwarf and Pandan Dwarf variety. The plants are smaller and shorter so they are easier to harvest. Also, the yield is very high. When the plants are smaller many farmers can plant more trees in an area. But these varieties were not taken up because farmers were more interested in palm oil at the time. “Not many people were interested in promoting these varieties. Now that everyone is starting to see potential in the coconut industry, these varieties can be a new source of wealth because they can double the income of farmers. However, the seedlings of the new varieties are currently insufficient for all the coconut farmers in the country. They are also more expensive than traditional varieties, which may be a challenge because most of the smallholders have limited budgets.

The Malayan Yellow Dwarf (MYD) and Malayan Red Dwarf (MRD) are about RM10 per seedling while the Matag can go up to RM60 because of the high demand. See the MYD coconut nursery in Manjung Cocounut Nursery Station for farmers (See next photo). The three varieties produce a similar number of nuts per tree, but the Matag variety has thicker flesh, which is good for coconut oil, virgin coconut oil and coconut milk. It is not easy to produce seedlings. Someone has to climb the tree and induce pollination to get the required variety. In Malaysia, there are not many with this skill. The government allocated RM50 million of its budget last year to help farmers purchase seedlings and replant. The money was also aimed at helping farmers improve the maintenance of their plantations and use fertilisers to increase productivity. Previously, farmers did not bother to use fertiliser because they were not aware of its importance. Some just waited for the mature coconuts to fall before collecting them. In Malay word, the local call it the three T's that was  TANAM, TINGGAL and TUAI (plant, wait, harvest). It is easy to apply but production is very low. With the old variety, they can get 15,000 nuts per hectare if they use fertiliser. If not, they can only get 6,000 to 7,000 nuts per hectare per year. This initiative by the government encourages farmers to use fertiliser and adopt agronomic practices or proper farm management. 

For me as agronomist, the good coconut farm management practices are especially important today as the trees are facing threats from pests such as the rhinoceros beetle and red palm weevil. The red palm weevil is actually from the Middle East and could have come when people brought in date palms for ornamental purposes. It is quite devastating. You can see the whole plant collapse because the weevil will eat the inside of the tree trunk. The Department of Agriculture is monitoring this very closely. Actually it was time for a revival to accelerate the growth of the local coconut industry, the government will have to play a big role in ensuring that consumers get a consistent and affordable supply of coconuts while also improving the livelihood of farmers. I believes that the government is trying its best to strike that balance, especially during festive seasons, when the demand for coconuts usually soars. However, if the government can align its efforts to increase the local supply of coconuts and reduce the reliance on imports, this problem can be solved to a large extent. For me it is very important for the government to take this seriously. If we want to elevate the incomes of rural farmers, we need a good strategy, standards of procedures and proper monitoring by the relevant agencies. include the set up of appropriate set up of an agency such as Coconut Board Authority. Many people in the market are complaining that their coconuts cannot be sold and I think it is not because of oversupply but a lack of strategy on how to market them. We need to have more downstream factories and distribution strategies for young coconuts, for example. 

The budget allocation for few year in RMK-11 and RMK 12 was a good move, but the amount was not enough to develop the whole industry. If Malaysia want to replace all the old coconut trees with new ones, it need a bigger budget. This is a good opportunity for bodies such as Felda [Federal Land Development Authority] and Risda [Rubber Industry Smallholders Development Authority] to get involved because they already have systems to monitor and manage the  plantations. With a large number of farmers working under the management of those entities, it can be easy to manage in terms of harvesting and to venture into the downstream sectors.  There should be a comprehensive strategy covering the entire value chain, from the production of seedlings and increasing the number of plantations to education to improve farm management and encouraging the use of fertilisers. The government will have to play a leading role in providing assistance to farmers for at least five years. While the private sector also has a role to play, the initial stages will have to be funded by the government. There are question whether most coconut farmers can get financial assistance from entities other than the government. The chances are slim as the coconut industry is only just emerging. Even though Agrobank is trying its best to help entrepreneurs because we work alongside it. But it cannot help everyone as it also has [qualification] criteria. With projects involving high-value crops such as rock melons, it is able to help. But I have not heard anything regarding coconuts yet. It will take some time. It takes three years for a coconut plant to produce a yield, compared with merely three months for rock melons. That is one of the problems farmers face and it is why the government has to step in. The farmers can supplement their income by planting bananas, chillies, water morning glory and okra, which have a short harvesting period, while waiting for their first harvest.

The high price of local coconuts has deterred manufacturers from relying solely on domestic supply. Manufacturers that want to ensure customers can purchase their goods at affordable prices are caught in a bind as they also have to control their raw material costs. Linaco Manufacturing (M) Sdn Bhd managing director Joe Ling mention the price of local coconuts is too high. It can be as much as 2½ to 3 times the price of coconuts from neighbouring countries. Linaco is a family-owned business that has been manufacturing coconut-related products for 27 years. The company sources its coconuts from a neighbouring country Indonesia imported at Batu Pahat Barter Port that I visit recently (See photo next). To increase the attractiveness of local suppliers, the government should set up a board to regulate the coconut industry and manage prices to ensure that the difference between local and foreign coconuts is not too wide. It will help to regulate transactions of coconuts and prices of imports. In addition, subsidies have to come in. When the government taxes the industry, the money must always come back in a cycle to assist the upstream industry. Government agencies such as the Malaysia External Trade Development Corporation as well as the Ministry of International Trade and Industry and the Ministry of Agriculture have supported the coconut industry through various initiatives. Actually I believe they can do better and engage the industry players more. The industry cannot grow only through contributions from the private sector and it was a joint effort. Ling believes that there should be a comprehensive plan for the local coconut industry. “For the past 20 years, coconut trees have been felled and replaced with oil palm and rubber. The government’s planning revolved around planting whichever crop was better. But the sustainability of the business is not there. 

If local coconuts are competitive in which manufacturers can lower their costs by buying them to help support the local industry. This is not an initiative the private sector can undertake by itself. Acquiring new land to plant coconuts is expensive and providing farmers with new and good varieties of seedlings requires a substantial amount of capital. It will be too costly and labour-intensive for the private sector to take this on by themselves. However  when Malaysia have a board it can regulate the standard of seedlings and bring in seedlings from other countries. Government can select members of the board and have a fund to manage it include to do R&D and set up a lab to create those seedlings. This would be like the palm oil board in which is very strong and able to support its farmers. Over the past few months Linaco reported has been engaging with the governments of Sabah and Sarawak to expand coconut plantations. The Sabah government announced plans to open between 10,000 and 25,000 acres of new coconut plantations by working with farmers in rural areas and collaborating with Linaco including in the downstream industry. They told them that if there were coconuts here at a competitive price and volume, someone would take them. We need consistency of volume and prices. Our commitment to the government is that we are there if you can provide this. Linaco has also struck up a joint venture with a seedling expert from India to bring in new varieties.

The Virgin Coconut Oil (VCO) is an emerging opportunity for manufacturers in which there is also demand for young coconuts that can be served and consumed in restaurants. These are quite expensive product costing RM5 to RM6 each. If many promote our coconuts well it can be a good opportunity for income. It was suggested that farmers use the Malayan Yellow Dwarf (MYD) and Malayan Red Dwarf (MRD) varieties because they can get more returns if they sell young coconuts for VCO processing. The other parts of the coconut tree can be used for various purposes. The trunk, for instance can be used to build furniture, the young leaves for ketupat and the fibre, which is the outer layer of the coconut, can be used in the agricultural sector. The sector can use it to make cocopeat. It is a medium for plants to grow. It was reported that the local coconut industry has its fair share of players, from the big listed companies and decades-old businesses to small and medium enterprises (SMEs) and even micro-businesses that sell coconut milk in wet markets. In the SME space company such as Silas Ling and Michael Lu have brought technology and innovation to the process of producing and delivering coconut milk with their company known as Santanku Sdn Bhd. They became interested in the business when they realised that the process of extracting coconut milk in wet markets was not very hygienic. They also found that there were ready solutions in the market to address this problem. The model for our business is like the one in Singapore, where traditional methods are no longer used to produce coconut milk. The traditional method [using manual labour] creates coconut milk that tastes good, but does not meet hygiene and other food safety requirements. For Santanku’s process, only the opening of the coconut to remove the shell requires manual labour. The moment it goes into the machine for the milk to be extracted from the meat, there is no human contact. It goes through pasteurisation, then it is chilled very quickly so the bacteria does not really multiply during that period. Fresh coconut milk is sensitive. Once it is exposed or not stored well, it will start to spoil four or five hours later. For cendol sellers whose business can be dependent on the weather, purchasing coconut milk ahead of time can lead to losses if they are unable to use it that day. This innovation lengthens the storage time through pasteurisation, a method commonly used in many industries to sterilise food and extend shelf life. Cendol sellers find us handy because if it is a rainy day, they can cancel their order. They do not have to bear the risk of wasting coconut milk. The market for coconut milk is huge. It is heavily used in delicacies in the Malay and Indian communities, Ling points out. Santanku does not see itself capturing the whole market eithers. Santanku does not intend to compete with the big coconut manufacturers. They wants to focus on serving the micro, small and medium enterprises, particularly the stalls and mamak restaurants. They also need to control the cost of raw materials to ensure that the price of the end product stays the same and the quality is not compromised, he adds. If everything can be sourced in Malaysia, why not? their aim is to help our people. If the government has a big push for the coconut industry, I am quite sure we will be able to see a big change in three to five years. Then, we can source only local coconuts. Thanks.

By,

M ANem,

Putrajaya,

Malaysia.

(June 2021).