Coconut’s versatility encourages planting

KUALA LUMPUR — 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% in the decade to 2026 as yields in the biggest growers rebound, according to a July 10 report by the Organization for Economic Cooperation and Development (OECD) and the United Nations’ Food and Agriculture Organization (FAO).

“The international market is not only buying the oil, which they purify into cooking oil,” Danilo D. Valdez, managing director of trading company Raco Commodities Phils. Inc., said in a July 20 interview.

“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 fiber 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 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 tons by 2026, according to the OECD and FAO report.

Plantation yields in Southeast Asia will climb 15% 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 percent in the 12 years to 2016 due to aged palms, pests and diseases, which effectively neutered the 1 million hectares of new coconut plantings in the past decade, according to the FAO.

PRICE RELIEF
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,” Philip Soliven, the president of Cargill Inc.’s Philippine unit said in an interview.

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.

Coconut palms start bearing fruit about five years after planting, which means supplies may begin picking up soon.

Copra production in the Philippines is forecast to rise to 2.255 million tons this year from 2.081 million tons in 2016, Yvonne T.V. Agustin, executive director of the United Coconut Association of the Philippines (UCAP), said in an interview from Manila.

Exports will likely rise 6.5% 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 $2,027.50 a ton this year from a low of $745.25 in 2013 before Typhoon Haiyan hit, causing as much as $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 $1,635 a metric ton on Rotterdam on July 31. Palm kernel oil, its rival and closest substitute, peaked of $1,845 a ton in January this year before easing to $1,110 on July 31.

“The premium of coconut oil over palm kernel oil is really very high,” UCAP’s Ms. 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 in April launched another coconut-infused coffee beverage, indulging customers who want more than just the option of having single-origin coconut milk in their drinks. Toasted Coconut Cold Brew, which is sweetened with flavors of toasted coconut and honey, comes on the heels of its Coconut Milk Mocha Macchiato which Chief Marketing Officer Sharon Rothstein said lifted sales.

Sales of PepsiCo’s Naked juice and coconut waters reached more than $1 billion last year. Jamba Inc. has introduced colada fruit smoothies made with coconut water, while in Malaysia, Nestle SA launched a coconut-flavored 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. — Bloomberg