August 18th, 2016

Coconuts: A Versatile Niche Product in Agricuture

Coconuts are an up and coming niche agricultural product. Because of their versatility, health benefits, and limited areas of production, coconuts are an increasingly sought out good in the international markets. Thus, demand for coconuts has grown upwards of 500% over the last decade. In this article, we explore the properties of coconuts as well as their ongoing market dynamics.

A Versatile Niche Product

Because coconut-based products are so diverse, its price and demand has gone up substantially over the last several years. The coconut itself has several main parts, such as the meat, the shell, and the coir. Out of these parts, products such as soaps, virgin coconut oil, health products, and coconut water, can all be extracted. For example, coconut husks and shells are used to create products such as traditional pots and bowls, utensils, handicrafts, and even caves for aquariums. Similarly, they are used in exfoliating products and for a variety of household products and flooring materials.

The coconut meat itself is used in the making of organic goods, such as coconut oil and milk as well as coconut sap, toddy, and nectar. Likewise, coconut water can be consumed by itself or used in the elaboration of coconut wine and vinegar. Finally, the coconut coir or outer fiber can be used in making brushes, rugs, mats, strings, and ropes. Because of its natural utility and the value in each of its parts, coconuts represent a great agricultural investment as well as a sought out product.

Coconut Markets Worldwide

Coconut palm tree yield peaks at between 20 and 40 years of age, at which point a healthy tree will produce 50 to 200 coconuts per year. After the 40-year mark, the amount of coconuts produced by each individual palm tree gradually diminishes, dropping production entirely around age 70.

Until 2010, Brazil was the world’s top coconut producer. However, in recent years, south Asian nations have emerged as the main producers. The top coconut producer today is Indonesia, whose plantations yield more than 18 million tons every year. The Philippines, second coconut producer in the world, exports more than US$1 billion worth of coconuts to the United States alone. Nonetheless, in spite of the widespread coconut production, supply growth is still lagging 8% behind growth in demand due aged palm trees and a lack of crop rotation.

Due to poor farming techniques, coconut farms in south Asia are currently producing at a rate of 75% on mature adult trees and the production percentage is declining. This decrease in production is the result of palm trees being approximately 20 years past their prime production age as well as the lack of a sustainable crop rotation plan. This market dynamic has created a new window of opportunity for coconut developers to fill the upcoming gap in product supply. The current market gap offers tropical plantations, particularly those in Latin America, where water resources are abundant, with an opportunity to claim a place with the coconut supply chain.

Coconut palm trees require a very specific environment in order to flourish, normally above 65 degrees Fahrenheit. Similarly, they are extremely sensitive to cold and usually require high humidity climates. There are two main types of palm trees: tall Tall types and Dwarf types. Even though coconut palm trees are originally from the Pacific Ocean region. Tall types are normally found in Latin America and they include the ‘Panama’ and ‘Jamaica’ strands. Meanwhile, dwarf types are endemic to tropical countries in Asia and they include the ‘Malayan’ strand. The main difference between both types of palm trees is the height to which they grow. When entering into coconut agriculture, farmers and investors should consider environmental elements in order to determine which palm tree strand is best suited for their farm operation.

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