The Perfect Storm For Coconut

Rising Demand, Declining Supply: Is There A Coconut Crisis On The Horizon?

If you’re at the grocery store, it seems that no matter where you look you’ll see something with coconut in it. There’s coconut oil, coconut water, coconut milk, fresh coconut, coconut flour, coconut cosmetics…the list goes on. 

Naturally, you would think that the world’s producers of coconut are doing everything they can to increase production and keep up with market demand. But in reality, volumes from traditionally coconut-producing regions like southeast Asia are actually declining. 

For a multitude of reasons, coconut production in places like Indonesia, the Philippines, and Malaysia is spiraling downwards, leading some experts to warn of a coming ‘coconut crisis’ in which supply can’t match demand and prices skyrocket. 

In this article, we’ll look at the key reasons that coconut production is declining in key regions, the potential effects of this decline, and how it could create opportunities for the emerging coconut industry in other areas. 

The Decline

One of the major factors behind the decline in southeast Asia’s coconut production is aging. Many of the coconut palms in Southeast Asia are reaching the end of their productive life cycle, having been planted around 50 years ago. The aging trees have experienced reduced yields and increased susceptibility to diseases, and the lack of replanting initiatives has exacerbated the decline in production.

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In addition, the efforts of governments in high-producing countries like the Philippines or Indonesia have been insufficient, as agencies have chosen to focus on large-scale projects and plantations. This isn’t entirely the government’s fault, however; since most farms in this region are smallholder or family-run, it’s difficult to coordinate production and achieve a consistent and uniform supply. 

Another major factor is climate change, which has had adverse effects on coconut production in Southeast Asia. Rising temperatures, changes in precipitation patterns, and an increase in extreme weather events like typhoons and cyclones have damaged coconut plantations, leading to reduced yields and tree mortality. The Intergovernmental Panel on Climate Change (IPCC) suggests that the frequency and intensity of extreme weather events are expected to rise in the future, posing further challenges to coconut cultivation in the region.

Lastly, it’s impossible to talk about declining coconut production in southeast Asia without mentioning what is perhaps the biggest culprit of all: palm oil. Palm oil production has experienced rapid growth in Southeast Asia, emerging as a lucrative commodity with diverse applications in various industries. However, this expansion has come at the expense of other traditional crops, including coconut plantations. 

From Crisis, Opportunity

These factors have led experts to foretell of a dire situation facing the global fresh coconut market. In fact, these predictions go so far as to suggest that coconut production in Asia (by far the leading region, accountable for roughly 70% of all production), will decline by 80% over the next decade. 

It’s not difficult to imagine the effects that this supply collapse could have on the ever-growing market for coconut and coconut products. Coconut water, for example, could lose competitiveness as an alternative to sugar-laden sports drinks if they become too expensive. Coconut-based snacks and candies, which are also often marketed as sustainable and healthy alternatives to traditional sweets, could also be affected. 

But where there is a crisis, there is also often opportunity. New players are already stepping up to fill the production gap by investing heavily in coconut production. Countries such as Mexico, Brazil, and Colombia all possess suitable land for coconut production, in addition to having superior logistical access to markets in the U.S. and Europe. Given the declining production trends in southeast Asia, it seems natural that production centers would transition to the Latin American region.

The large-scale investment taking place in Latin America’s agriculture sector seems to herald this shift. Latin American countries have been investing in modern agricultural techniques, research, and development, leading to higher coconut yields and quality. Here in Colombia, Farmfolio has made significant inroads into production, best practices, and genetic development, including the establishment of the first registered coconut nursery in the country.

A Changing Landscape

It may be true that the traditional regions of coconut production aren’t going to be able to meet future demand. But that doesn’t mean the demand is going away. Other countries are going to have to step up and provide additional supply of fresh coconut and its many value-added products.

Colombia, as it so happens, is quickly positioning itself as a prime alternative. With strong logistical access to both Pacific and Atlantic sea lanes, as well as an ideal tropical climate and long-standing agricultural traditions, Colombia is a country that could learn from the mistakes of places like Indonesia and the Philippines and take a more measured approach to coconut production. Only time will tell, but for now, alternatives to production in southeast Asia are looking especially attractive.

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