A GROWING COCONUT CRAZE
Replantings and rehabilitation program aims to satisfy the global appetite for fruit, writes Anuradha Raghu.
Coconuts seem to be everywhere these days. Whether as “water” in PepsiCo Inc.’s Naked drink range, as “milk” in Starbucks Corp.’s coffees, as shampoo in L’Oreal SA’s products or even as a patty in Beyond Meat’s vegan burgers, the tropical fruit has captured new markets with a growing reputation as a healthy, natural product.
The popularity has been a boon for prices, with the cost of coconut oil alone more than doubling since its low in 2013. But it hasn’t translated into increased production as diseases, natural disasters and aging plantations kept global output stagnant over the past decade.
That’s about to change thanks to a program of replantings and rehabilitation across the tropics. Output of copra, the dried coconut meat that’s used to make coconut oil, will jump more than 30 per cent in the decade to 2026 as yields in the biggest growers rebound, according to a July 10 report by the Organization for Economic Co-operation and Development and the United Nations’ Food and Agriculture Organization.
“The international market is not only buying the oil, which they purify into cooking oil,” said Danilo D. Valdez, managing director of trading company Raco Commodities Phils. Inc. “They also have found out uses for virgin coconut oil, coconut water, and those kinds of derivatives products from coconut which are very good for people, that they’ve positioned for an organic and healthy lifestyle.”
The key to the coconut’s popularity comes from the many products that a single nut produces. One package offers a high-energy food, a versatile oil, a nutrient-rich water, and coir — a fibre that’s used to make rope and bedding. And that’s all contained in a water tight package that helped it spread across the globe’s tropical regions from the Philippines to the Caribbean.
Its versatility has led to the coconut being dubbed the “Swiss Army Knife” of plants and has made it a staple product in many countries. It remains so important in the Philippines, the biggest producer of copra, that the FAO estimates a quarter of its 100 million people are dependent on industries associated with it.
“There’s great demand in foreign countries like South Korea and Canada,” said Carlito D Villamayor, a coconut farmer in the Philippine province of Quezon who’s switched his palms to make coconut sugar rather than copra because prices are higher. “Now China is ordering from us, so we have to increase our production.”
Investment in production will lift copra output by 1.1 million metric tonnes by 2026, according to the OECD and FAO report. Plantation yields in Southeast Asia will climb 15 per cent in that time thanks to the replanting of aged palms and rehabilitation of growing areas, particularly in storm-hit parts of the Philippines and Indonesia. — which provide almost three quarters of global copra production between them.
That follows a decline of more than five per cent in the 12 years to 2016 due to aged palms, pests and diseases, according to the FAO.
Following typhoon Haiyan in 2013 “a main feature of the rehabilitation program was to make the conditions of the affected coconut farmers better than pre-typhoon conditions,” said Philip Soliven, president of Cargill Inc.’s Philippine unit. Cargill led a replanting program in Leyte province that helped more than 400 coconut farmers. A second phase program should help about 3,300 more in the Philippines and Indonesia.
Copra production in the Philippines is forecast to rise to 2.255 million tonnes this year from 2.081 million tonnes in 2016, said Yvonne Agustin, executive director of the United Coconut Association of the Philippines from Manila. Exports will likely rise 6.5 per cent this year, she said.
It should be good news for lovers of coconut products, who may get some relief, with that extra production potentially weakening prices. But it’s potentially bad news for palm oil growers.
Prices of coconut oil had a closing peak of US$2,027.50 a tonne this year from a low of US$745.25 in 2013 before typhoon Haiyan hit, causing as much as US$14.5 billion of damage, according to AIR Worldwide, and affecting 33 million coconut trees in the Philippines’ Eastern Visayas region alone, according to the FAO.
Coconut oil closed at US$1,726 a metric tonne on Rotterdam on July 27. Palm kernel oil, its rival and closest substitute peaked of US$1,845 a tonne in January this year before easing to US$1,085 on July 27.
“The premium of coconut oil over palm kernel oil is really very high,” UCAP’s Agustin said. “Maybe if prices come down, it may attract demand. There is always a demand for coconut production especially the core demand, where no other oils can replace coconut oil in certain usages. Even with prices now, which is much higher than palm kernel oil, there’s still that core demand for coconut oil.”
That demand doesn’t look like stopping, thanks mainly to western consumers.
Starbucks launched popular coconut-infused beverages such as Toasted Coconut Cold Brew that the company said lifted sales.
Sales of PepsiCo’s Naked juice and coconut waters reached more than US$1 billion last year. Jamba Inc. has introduced colada fruit smoothies made with coconut water, while in Malaysia, Nestle SA launched a coconut-flavoured coffee mix. Food manufacturers are also rolling out new products such as Beyond Meat vegan burgers made with coconut oil, Dairy Crest Group Plc’s dairy-free coconut spread, McCormick & Co.’s coconut milk cooking sauces, and Mondelez International Inc.’s savory crackers made with dried coconut.