Keeping up with demand

The coconut oil industry is struggling to keep up with a surge in global demand and industry leaders say urgent action is needed to promote a sustainable sector Gill Langham

Coconut oil has a wide range of uses in the food, personal care and industrial sectors and the growing adoption of virgin coconut oil (VCO) in food and drink production is driving the market.

As well as being a food ingredient, VCO also has the potential to be used as an immune system booster against COVID-19, according to the International Coconut Community (ICC), an intergovernmental organisation of coconut producing countries.

“The COVID-19 situation has increased the demand for VCO in the Philippines, in particular among those with mild infections,” says Dr Fabian Dayrit, chairman of the ICC Scientific Advisory Committee on Health.

The global virgin coconut oil market stood at US$2.7bn in 2018 and was forecast to reach US$4.7bn by 2024, an industry report by Report Buyer says. Meanwhile, coconut oil prices were hovering around US$1,000/tonne in September 2020, according to Index Mundi, and a Market Watch report projected that the global coconut oil market would reach US$5.5bn by 2026 from US$4.3bn in 2020.

However, the coconut sector is struggling to keep up with global demand. Coconut farms tend to be monoculture and increasing tree senility raises concerns for the future.

In terms of coconut oil, global production in 2019/20 is projected at 3.62M tonnes, according to forecasts by Statista. This figure has remained relatively unchanged since 2017 when production was 3.61M tonnes, according to the ICC.

“The market is expanding at an exponential rate, especially for high value products, and production is decreasing,” said Dr Pons Batugal, chairman of the ICC’s Technical Working Group and president and board chair of the Farmers Community Development Foundation International (FCDF).

Speaking at a webinar hosted by the Coconut Coalition of the Americas (CCA) on 8 October 2020, Dr Batugal joined a panel of industry experts to discuss

the current status of the sector and the challenges it faces.

“The industry and coconut farmers both need to be urgently assisted to make the coconut industry sustainable,” he said.

“Any actions we take to improve the sustainability of the industry should be science-based, technically feasible, financially viable for the user, socially acceptable and environmentally safe.”

The objective of such initiatives should be to help farmers increase yields and productivity, reduce production costs, reduce field losses and help them to obtain a fair market price, he said.

Global challenges

Lower production is mainly due to palm senility (the global average of ageing palms is about 50%), typhoons, pests and diseases, drought and a lack of quality materials.

“If we don’t replace our senile coconut palm, there is going to be a further decrease in production in the next five to 10 years,” said Dr Batugal.

Action needed to rebalance the world coconut situation included replanting 655M senile palms, increasing yields and farm productivity and expanding coconut hectarage, Dr Batugal said. To increase yields, large-scale replanting was needed using early-bearing, high yielding and disease resistant varieties.

The market

Coconut palm is grown in over 90 countries on around 12.1M ha of land, producing around 69M nuts/year, according to the ICC. The global export value of coconut products in 2019 reached US$11.6bn.

The coconut is predominantly a smallholder crop with 92% of businesses run as small operations with farmers growing less than two hectares per family, the ICC said.

The Philippines and Indonesia are the world’s largest producers of coconuts and exporters of coconut-based products. Other producers include Malaysia, India and Vietnam.

In terms of coconut oil, the Philippines produced more than 1.3M tonnes and exported 951,353 tonnes in 2018, while Indonesia produced 1M tonnes and exported 677,699 tonnes, according to figures in the ICC Coconut Statistical Yearbook 2018.

The area under coconut in the Philippines was 3.63Mha in 2018 with an estimated 347M bearing coconut trees. In

Photo: Adobe Stock

Keeping up with demand

Indonesia, the coconut plantation area has declined from around 3.65Mha in 2013 to 3.42Mha in 2018.

Palm/coconut debate

Coconuts are a multi-product resource, have a low environmental impact and do not generally require pesticides and herbicides.

However, the sustainability of the coconut industry has been the subject of recent debate after a study stating that coconut oil production posed a threat to biodiversity five times greater than palm oil. This sparked a heated discussion on social media.

Critics of the paper, published in Current Biology in July 2020, accused the authors of promoting dubious statistics and attempting to whitewash palm oil production. The study said around 12.3ha of land were used to cultivate coconut palms compared with 18.9M ha for palm oil. However, coconut oil had a much better reputation, according to lead author Erik Meijaard, who directs Brunei-based consulting company Borneo Futures and chairs the Palm Oil Task Force of the International Union for Conservation of Nature (ICUN).

That reputation wasn’t deserved, Meijaard and others wrote in the twopage document. The authors calculated the number of species under threat from the cultivation of seven vegetable oil crops and divided those by the global oil production for each crop.

Coconut threatened 20.3 species for every 1M tonnes of oil produced, they reported, while for olive oil and palm oil, the figures were 4.1M and 3.8M species respectively. Later the figure for coconut oil was revised to 18.3.

“The outcome of our study came as a surprise,” Meijaard said. The reason was that coconuts were primarily grown on tropical islands, “many of which possess remarkable numbers of species found nowhere else in the world,” he said.

In its response to the article, the ICC said the paper was limited as its conclusions were based only on commercially-traded coconut oil and ignored the fact that a significant amount of the coconut harvest is used locally in food, drink and other household products.

“The coconut is a smallholder crop. Thus, unlike other large-scale plantation crops, there is no need to destroy forests that kill indigenous crops and animals to establish crops,” the ICC statement said.

According to the ICC’s Dr Dayrit, the comparison between coconut and palm oil was a “false comparison”.

“I do not doubt that the palm tree is very productive but comparing it with the coconut based on oil production alone is misleading and plays into the hands of the palm industry,” he said.

The coconut is predominantly a smallholder crop – 92% of businesses run as small operations, with farmers growing less than two hectares per family

Working together

All the speakers at the CCA webinar agreed that collaboration across companies and countries was the key to sharing sustainability solutions.

“It’s about building a coalition of leading brands and buyers of coconut products that want to support sustainability and transparency,” said Keith Agoada, co-founder and CEO of digital global marketplace Producers Market.

The ICC is active in R&D networking and knowledge and technology transfer programmes.

A number of global companies have launched schemes with other businesses and organisations to improve the sustainability of the coconut oil sector.

One such partnership between BASF, Cargill, Procter & Gamble (P&G) and the Deutsche Gessellschaft für Internationale Zusammenarbeit (GIZ) developed a project for certified sustainable coconut oil production in the Philippines and Indonesia.

The Sustainable Certified Coconut Oil (SCNO) production scheme trained more than 4,100 coconut farmers in Good Agricultural and Processing Practices (GAP) as well as Farm Management practices between November 2015 and October 2019. About 1,600 farmers also received additional training and had been certified against the Rainforest Alliance Sustainable Agriculture Standard.

Certified coconut farmers harvested more and productivity was 26% higher in comparison to non-involved farmers.

The first Rainforest Alliance Certified coconut oil was produced in 2018 with the support of the SCNO partnership.

“We have reached an important milestone on the way to establish certified sustainable supply chains and improve the livelihoods of smallholder farmers,” said Ina Boos, BASF project manager, sustainable certified coconut oil.

Coconut oil is an important ingredient for leading chocolate and cocoa product company Barry Callebaut Group which is aiming to have 100% sustainable ingredients in all its products by 2025.

“Sustainability in the coconut sector is an important concern to us. This is why we initiated the Roundtable on Sustainable Coconut and Coconut Oil, with our partner USAID Green Invest Asia in 2019,” the company’s director of global ingredients sustainability Oliver von Hagen said.

“A key result of the roundtable is a Sustainable Coconut Charter, a common approach to sustainability in the sector.”

The future

The ICC says it will continue to work with its members to improve the sustainability of the entire coconut sector.

Initiatives include inter-cropping, improving yields, coalitions, educational schemes and the creation of coconutbased ecotourism sites.

Dr Batugal stressed that the benefits of any sustainability schemes should benefit the farmers as well as the wider industry.

“The coconut farmers are the foundation of the industry. We need to develop a holistic approach and integrate all the interventions, if possible, within the farming communities.” ● Gill Langham is the assistant editor of OFI