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Drastic decline in farm gate price of coconuts; immediate action needed from authorities

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The years 2016 and 2017 experienced a sharp increase in coconut prices owing to climate change



By Crysantha Jayawardane

Commencing from around the third week of July, farm gate price of coconuts have dropped from a high of around Rs. 45 to Rs. 28 by 15 August.

The years 2016 and 2017 experienced a sharp increase in coconut prices owing to climate change, the lack of monsoon seasonal rains in particular. The coconut yield dropped by 40-50% in the coconut triangle area, and the nut weight by 30-40%. The farm gate priced peaked at Rs. 55 and retail nut price at Rs. 100. However, the coconut growers did not benefit from these high prices due to sub-standard 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 short fall of nuts in 2017, coconut processing industrialists lobbied for the importation of frozen coconut kernels. With much reluctance from the Coconut Research Institute (CRI) and other stakeholders, including the Coconut Growers Association, by mid-June, 1751 metric tons of coconut kernels were imported, which is equivalent to 5.2 million nuts.

As per 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 accrue when local nuts are used from the derived by-products, husk, parings, shell and coconut water, the cost of frozen coconut kernel translated per nut was around Rs. 56. Few industrialists ventured into these imports. They have now suspended the import of kernels as it was not a viable solution. More importantly, the processed products exported could not be identified as Sri Lankan products.

It is obvious that, if 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 2016/2017 period 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 the 2018 Southwest monsoon, the coconut nut yields have improved. The Coconut Research Institute (CRI) predicted a crop yield increase for 2018 as against 2017. In Kurunegala District, the increase is as follows: February - 7%, March - 17%, April - 21%, May - 31%, June - 22%, July - 50% and August - 13%.

Due to the negative psychological publicity by the coconut traders in with respect to the importation of coconut kernel, increase of nut yields, and shortfall in demand, the nut prices from January have been declining steadily, and the present farm gate price is Rs. 28 while 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 Rs. 30 to Rs. 35, as determined by the Coconut Cultivation Board (CCB) and CRI.

As per a Sunday paper of 19 November 2017, the Coconut Cultivation Board (CCB) Chairman Kapila Yakandawala said, with the crop yield increasing by around 40 million nuts per month, the price of a nut will come down to around Rs. 65 next month. 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. 40-60 per nut,” Yakandawala said.

It is paramount that the sustainable price provided to the coconut farmer is maintained at Rs. 40 to Rs. 50 per average-sized nut to enable the farmer to carry out essential agricultural practices with a depleting workforce, escalating wages, and withdrawal of fertiliser 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 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:

  • Allow export of fresh nuts without export levy
  • Restrict the import of palm olein and other edible oils
  • Allow industries to produce value-added products for export without restrictions
  • Formulate mechanisms for forward contracting with minimum price and a formula for price escalation if required

(The writer is Executive Committee Member, Coconut Growers Association and can be reached via email on cryshoja@gmail.com.)

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