No relief appears to be in sight for the escalating coconut prices as industry experts caution that significant reductions could take at least six months, even if immediate measures are implemented.
Experts estimate it would take another two-and-a-half years to fully stabilise the market. As a short-term solution to ease the burden on consumers, they suggest importing coconuts, particularly from countries like India or Indonesia, where the taste closely matches local products.
However, they also highlight that global coconut prices have risen sharply, raising uncertainty about whether such imports would effectively bring down local prices or provide much-needed relief to struggling households.
Skyrocketing prices
The impact of these rising prices is being felt across Sri Lanka, particularly as the festive season approaches.
Families are grappling with the surging costs of coconuts, an essential ingredient in countless local dishes. With this staple food item becoming increasingly unaffordable, households are being forced to rethink their shopping habits and meal preparations.
As December brings both the holiday season and the weight of higher food costs, the struggle to afford coconuts has become a significant concern, altering traditions and everyday meals.
This sharp increase in prices is evident when comparing data from the past year.
Coconut prices have skyrocketed, with average retail prices in key markets such as Pettah and Narahenpita surging from Rs. 120 per nut in December 2023 to as high as Rs. 195 by this month, marking a staggering 63% increase, according to Central Bank of Sri Lanka (CBSL) statistics. Wholesale rates have also risen steeply, climbing from Rs. 92 per nut in December 2023 to Rs. 150 by December this year.
In December 2023, wholesale prices in Pettah and Dambulla averaged Rs. 92 per nut, while retail prices stood at Rs. 83 in Pettah, Rs. 88 in Dambulla, and Rs. 110 in Narahenpita. By November this year, these prices had already surged, with wholesale rates reaching Rs. 125 and retail prices rising to Rs. 113 in Pettah, Rs. 130 in Dambulla, and Rs. 165 in Narahenpita.
The upward trend continued through December as retail prices peaked at Rs. 145 in Pettah, Rs. 153 in Dambulla, and an alarming Rs. 190 in Narahenpita, with some outlets reporting prices as high as Rs. 195.
Impact of poor policy decisions
Coconut plays a significant role in Sri Lanka’s agricultural sector, accounting for about 12% of all agricultural produce. The country has around 409,244 hectares dedicated to coconut cultivation (as of 2017), with an annual production of approximately 2,500-3,000 million nuts. New measures are being introduced to increase this to 3,600 million nuts per year.
The surge in coconut prices has left both consumers and industry stakeholders grappling with its far-reaching impacts. While consumers struggle to afford this staple ingredient, growers face a crisis stemming from years of policy mismanagement and inconsistent agricultural practices.
“Consumers are suffering because of the bad policy decisions taken by previous administrations over the past several decades. Even though the industry is vital, they never prioritised it properly. Many growers suffered from the fertiliser ban and we are now seeing its results,” a large-scale coconut grower based in Dankotuwa told The Sunday Morning.
The grower, who is also involved in the coconut oil manufacturing business, wished to remain anonymous, fearing repercussions from authorities following these remarks.
Explaining the long-term impact, the grower noted: “The fertiliser ban affected all crops alike. But for a coconut tree to bear fruit, it takes at least five years. If we don’t apply fertiliser this year, we will see its effects four or five years later. We’ve been warning past governments and the authorities, but they never took it seriously.”
Highlighting the lack of capable leadership in the sector, the grower lamented: “None of the officials appointed to oversee the industry understood it. Some had paper qualifications but lacked practical knowledge. At one point, they even conducted a census of coconut trees.
“There’s never been a consistent plan for the industry. Policies change with every government and growers struggle to adapt. We managed to sustain production by investing millions in timely fertiliser application, but most growers couldn’t afford to do the same. Coconut estates are vast and applying fertiliser requires a huge financial commitment.”
For consumers, the situation is equally dire. While sharing her struggle with rising prices, Ramani Jayatileka, a 56-year-old resident of Borella, said: “We’ve started using coconut milk instead of raw coconuts because they’ve become too expensive and scarce in the market.”
“It’s unbelievable. Coconut is second only to rice in demand, yet no priority has been given by the authorities. Have you ever had to buy a coconut for Rs. 230? I did so last week, because I needed to make coconut sambol. We can buy coconut milk from the supermarket, but how can poorer families manage? For them, a simple meal of rice with sambol is becoming impossible,” Jayatileka added.
Several critical issues
The challenges faced by growers and consumers alike highlight a complex web of issues impacting the coconut industry, from policy missteps to economic hardships.
Adding to this, Coconut Cultivation Board (CCB) Chairman Saman Dewage attributed the scarcity and escalating prices to several key factors, including adverse weather conditions and the lasting effects of policy missteps.
“During the recent rainy period, the coconut supply chain was affected,” Dewage explained, adding that the fertiliser ban and subsequent high costs even after the ban was lifted had severely affected production.
“Growers couldn’t apply fertiliser on time and now we are experiencing a low yield as a result,” he said.
Highlighting other critical issues, Dewage pointed out that Sri Lanka lost nearly 200 million coconuts annually due to wild animal attacks. “This is an alarming trend,” he said, highlighting how pests and severe weather had further reduced coconut output.
Despite these challenges, Dewage projected that prices could stabilise in six months and decrease significantly within two-and-a-half years.
He revealed that the Government was taking steps to address the crisis, along with the President’s verbal agreement to reduce fertiliser prices, with a target of increasing annual production to 4.5 billion nuts in five years.
While Sri Lanka’s annual coconut demand is 1.8 billion nuts against a production of three billion, Dewage noted that exports of coconut oil and related products had contributed to local shortages.
However, he defended exports as a vital source of foreign exchange, stressing the importance of finding a balance between meeting local demand and fulfilling export requirements.
Regarding proposals to allow exporters to import coconuts for their needs, he expressed concerns about increased costs making businesses less viable.
Dewage also acknowledged ongoing discussions about importing coconuts for domestic use while redirecting local production towards exports. Still, he underlined the new Government’s policy of prioritising local production over imports as a long-term solution.
Global trends
Nevertheless, as per statistics available with International Coconut Community (ICC), the desiccated coconut market saw a sharp price increase early this year, driven by rising global demand and limited supply.
Major producers, including the Philippines, Indonesia, and Sri Lanka, experienced significant price hikes, with Sri Lanka reporting the highest at $ 2,050 per MT – a 30.5% Year-on-Year (YoY) increase. The Philippines and Indonesia also saw price surges, reaching $ 1,911 and $ 1,999 per metric tonne, respectively.
Export data reveals strong growth in the Philippines, which exported 41,854 MT in Q1 2024, a 20.8% increase from the previous year. Key markets include the US and the Netherlands. Indonesia reported a 3.8% export growth from January to April this year, with steady demand from countries such as Singapore, Russia, and Germany, although imports declined in some markets like the US and the Netherlands.
Govt. response
However, when contacted, Consumer Affairs Authority (CAA) Chairman Hemantha Samarakoon clarified that the authority was not currently addressing issues related to coconuts. “All matters concerning coconuts are being handled by the ministry,” he added.
Against such a backdrop, Trade Minister Wasantha Samarasinghe announced in Parliament that steps were underway to distribute one million coconuts at Rs. 130 each through Sathosa outlets within two weeks.
State-owned plantations, including Chilaw Plantations and Kurunegala Plantations, have been instructed to supply coconuts at the latest tender price of Rs. 110 per nut. The initiative will prioritise urban areas where the shortage is more severe compared to rural regions.