Commencing from around the third week of July, the farm gate price of coconuts has dropped from a high of around Rs.45 to Rs.28 by August 15.
The years 2016 and 2017 experienced a sharp increase in coconut prices, owing to the climate change conditions, which was the lack of monsoon seasonal rains. The coconut yield dropped by 40-50 percent in the coconut triangle area and the nut weight by 30-40 percent. The farm gate price peaked at Rs.55 and the retail nut price at Rs.100. However, the coconut growers did not benefit by these high prices due to the substandard sizes of nuts and poor crop yield.
The country needs around 240 million nuts per month for domestic consumption and industry use. Owing to the shortfall of nuts in 2017, the coconut processing industrialists lobbied for the importation of frozen coconut kernel. With much reluctance from the Coconut Research Institute (CRI) and other stakeholders, including the Coconut Growers’ Association, by mid-June 2018, 1751 metric tonnes of coconut kernel were imported, which is equivalent to 5.2 million nuts.
As per the documentation available on the imported consignment, the landed cost of kernel when converted to a whole nut works to around Rs.56. This excludes the value addition that accrues when the local nuts are used from the derived bi-products, husks, parings, shells and coconut water.
The cost of a frozen coconut kernel translated per nut was around Rs.56. A few industrialists ventured into these imports. They have now suspended the import of kernel as it was not a viable solution. More importantly, the processed products exported could not be identified as Sri Lankan products.
It’s obvious that if an adequate coconut supply is to be maintained for domestic consumption and industrial production, a viable coconut growing sector has to exist, for which a sustainable price to the grower must be paid for the nuts.
During the period 2016/2017, though the prices increased, owing to the low nut weight and reduction of yields, the farmers did not obtain an enhanced income. They managed to sustain their plantation by irrigation and moisture conservation practices at additional costs.
However, with generous rain during the 2017 northeast monsoon and 2018 southwest monsoon, the coconut nut yields have improved. The CRI predicted a crop yield increase for 2018, as against 2017. In the Kurunegala District, the increase is as follows: February - 7 percent, March - 17 percent, April - 21 percent, May - 31 percent, June - 22 percent, July - 50 percent and August - 13 percent.
Due to the negative psychological publicity by the coconut traders with respect to the importation of coconut kernel, increase of nut yields, shortfall in demand, the nut prices from January 2108 have been declining steadily and the present farm gate price is Rs.28. (The retail price of coconut in the cities and suburbs is still around Rs.70, with no benefit to the domestic consumer).
The cost of production of a nut is between Rs.30 and Rs.35 as determined by the Coconut Cultivation Board (CCB) and CRI.
As per Sunday Observer of November 19, 2017, CCB Chairman Kapila Yakandawala said, with the crop yield increasing by around 40 million nuts per month, from next month, the price of a nut will come down to around Rs.65. The grower could get a minimum price of Rs.45, while the consumer could purchase a nut at around Rs.65.
“We need to control the price fluctuation, which is not good for the industry. We hope to maintain the price range between Rs.40 and Rs.60 per nut,” Yakandawala said.
It is paramount that a sustainable price to the coconut farmer is maintained between Rs.40 and Rs.50 per average size nut to enable the farmer to carry out the essential agricultural practices with a depleting workforce, escalating wages and withdrawal of the fertilizer subsidy.
What are the proactive measures that should be taken in the short term and long term to maintain a reasonable farm gate price?
Proper marketing strategies should be in place to maintain a sustainable price to farmers. The strategies should include domestic consumption and industrial use.
The disparity between the farm gate price and urban retail price is disproportionate, having provided for transport cost and profit margin.
The other strategies that should be adopted are:
1. Allow export of fresh nuts without export levy.
2. Restrict the import of palmolein and other edible oils.
3. Allow industries without restrictions to produce value-added products for export.
4. Formulate mechanisms for forward contracting with minimum price and a formula for price escalation if required.
(Crysantha Jayawardhana, an Executive Committee Member of the Coconut Growers’ Association, can be reached at email@example.com)