COCONUT DOWNSTREAM POTENTIAL

COCONUT (Cocos nucifera) in Malaysia are an important crop grown since long time ago. It is time for the local coconut industry to shine and having been overshadowed by oil palm for decades as claimed by industry observers. This is being driven by declining palm oil prices in long years ago and rising demand for coconut-derived products. But there are many challenges. For one, local coconuts cannot compete with imports in terms of price and scale. According to news reports earlier in this year 2020 in which the local coconut suppliers were calling for the government to regulate the import of coconuts. In their view whereby the influx of cheap coconuts from countries such as  Indonesia and Thailand was currently 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. For me the coconuts are Malaysia’s fourth largest industrial crop behind oil palm, rubber and rice with most of the large plantations found in Sabah and Sarawak. According to a report by the  Department of Agriculture Malaysia (DOA) that 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. Meanwhile for the palm oil acreage and prices rose from 2006 to 2012 and recently from 2021 - 2022.  Prices went on a general downward trend (except for a spike in 2017) due to oversupply and weak demand from top buying nations. From the report 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. This article in "Anim Agriculture Technology" I share hoe the revival of coconut industry in Malaysia should be.

Reported that the high price of local coconuts has deterred local coconut 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. The price of local coconuts is too high in which reported it can be as much as 2½ to 3 times the price of coconuts produced and imported from neighbouring countries such as Indonesia. Malaysia import coconut fruit from Indonesia since many years ago with Approval Permit are given to local importers by the Ministry Of Agriculture and Food Industry (MAFI). Therefore to  increase the attractiveness of local suppliers reported that the government ready to set up a new board to regulate the coconut industry and manage prices. The proposal is to ensure that the difference between local and foreign coconuts is not too wide but until this article written there are no new board appeared. The new board expected to help to regulate the transactions of coconuts and prices of imports. In addition the possibilities of subsidies have to come in for the industry. When the government taxes the industry then the money must always come back in a cycle to assist the upstream industry. There are possibilities the government agencies such as the MATRADE as well as the MITI and MAFI have supported the coconut industry through various initiatives. The industry cannot grow only through contributions from the private sector.   

For the past 20 years from my observation, coconut trees have been felled and replaced with oil palm and rubber. The farmers and government’s planning revolved around for the planting whichever crop was better. But actually the sustainability of the business is not there. If local coconuts are competitive, many 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. If Malaysia have a board later the body able to regulate the standard of seedlings and bring in seedlings from other countries. Farmers able to select members of the board and have a fund to manage it and also 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 in Malaysia for decade. The coconuts in Malaysia are reflected by the competitive price and volume in which the sector would take them. The industry need for a consistency of volume and prices so that the coconut base product and downstream activities are secured.  Thanks...

By,

M Anim,

Putrajaya,

Malaysia.

(July 2022).