Coconut farmers in Southeast Asia struggle as palm oil muscles in on them

From coconut to palm oil

The situation in the Philippines today is similar to Indonesia a few decades ago. Today in Indonesia, palm oil is a key driver of the national economy as not only a top export, but the main cooking oil and, increasingly, part of the national transport fuel mix due to rising biofuels mandates. But not long ago, coconut oil was central.

“From the 1970s up to the 1980s, most of the people in Indonesia were consuming coconut oil as cooking oil,” said Amrizal Idroes, founder of the Indonesian Association for Coconut Product Manufacturers (IACPM), and who has been working in the coconut industry for nearly three decades.

Coconut oil has long been used across South and Southeast Asia as a cooking oil. The coconut tree (Cocos nucifera), grown in both the Philippine and Indonesian archipelagos for centuries, produced not only oil, but also milk, water, sugar and a variety of other products, consumed almost entirely locally. Moreover, they grew alongside other tropical crops like bananas, cassava, coffee and cacao, part of a mixed-use landscape.

Coconut trees at a coconut farm in Sariaya, Quezon, Philippines. Image by Jervis Gonzalez for Mongabay.

That started to change when the African oil palm (Elaeis guineensis), which was brought by Dutch colonialists, began to expand in the 1970s. Within decades, palm oil went from niche product to top Indonesian export, quickly overtaking coconut. It was desirable for several reasons: its industrial efficiency, massive yields, flavorless profile, and ease of transport and processing. It is now the most-consumed food oil in the world.

“Coconut oil is less competitive compared to the cooking oil from palm,” Amrizal said. “Once the government began promoting palm oil, people began choosing it as the cheaper oil.”

This process may be repeating itself in the Philippines. Since 2010, palm oil imported from Indonesia or Malaysia has overtaken coconut oil as the top-selling oil in most grocery stories, according to data from the United Coconut Association of the Philippines. Like in Indonesia, the main reason is its low price — often half that of coconut oil.

A factory for processing oil palm fruit bunches into crude palm oil is nestled in a plantation in Indonesia. Image by Rhett A. Butler/Mongabay.

Sustainability concerns

Unlike coconut, which is dominated by smallholders, about 60% of oil palm is grown on large-scale plantations by companies like KLK, Sime Darby, Golden Agri-Resources and Wilmar International. These huge, typically monoculture, industrial oil palm estates have replaced rainforests across Southeast Asia, with massive processing and transportation infrastructure built by companies and governments to support the industry.

“Palm is a very industrialized crop,” said Vincent Johnson, director of the International Coconut Genetic Resources Network (CoGent). “There’s a kind of belief that oil palm is much more profitable than coconuts. Coconut plantations were even taken down in favor of oil palm.”

Johnson might have been talking about Riau, an Indonesian province on the island of Sumatra. Today, Riau is one of the country’s top producers of palm oil. But in the 1970s, it was at the center of coconut production on the island, says Amrizal. Gradually, much of what was formerly coconut land was converted to oil palm.

“The farmers are realistic,” Amrizal said. “When they look at their neighbor, they see palm oil is better, so they change the crop. This is what happened in Riau.”

An oil palm estate in Riau. Image by Rhett A. Butler/Mongabay.

The same is happening today in the southern Philippine island of Mindanao, where the government is promoting the expansion of the palm oil industry, including two new palm oil mills and several plantations.

Johnson and others, though, see hope in the growing desire for high-value coconut products in North America and Europe. Demand has risen for virgin coconut oil, organic coconut water and coconut cream due to health and sustainability concerns. This has led to some small-scale ventures to promote sustainable farming of coconuts.

One such effort is being led by the German development agency, GIZ, in partnership with the Rainforest Alliance, a nonprofit based in New York, and agribusiness giant Cargill.

“We have seen customer demand for a sustainable, certified coconut oil supply chain,” said Vivien Nacion, project manager with Cargill Philippines. “They want to make sure the traceability of the product they buy comes from farms that are not harming the environment.”

One of the challenges facing Cargill was that it was unable to source sustainable certified coconut even as demand for it was rising. A deeper look into the supply chain found a similar situation to what Tena is facing in General Nakar: limited capacity, low prices, and lack of infrastructure needed to produce high-value coconut products.

“Coconut was being grown by neglect,” said Ivan Idrovo, a Philippines-based agriculture consultant who worked with GIZ on this project. “Farmers were not taking care of the trees. They were harvesting but barely applying fertilizer. They know the coconut tree, and how to gather the coconuts, but everything else was wrongly done.”

The project has been operating since 2016 in both Indonesia and the Philippines, and has certified 1,531 farmers, who have reported higher incomes and productivity. While meaningful, for now, though, the demand for high-value coconut products from the West accounts for only a tiny fraction of coconut production in the two countries.

“So far, the market uptake of Rainforest Alliance-certified coconut oil is limited,” said Christiane Hornikel, program manager for nuts and fruit juices at Rainforest Alliance. “We don’t yet have a consumer end product with the Rainforest Alliance label for coconut oil on pack, but producers can sell their [coconut] as certified.”

In General Nakar, the idea of producing virgin coconut oil, organic coconut milk or coconut water is unimaginable for farmers who lack access to basic refrigeration technology and processing equipment.

“We’re limited as producers,” said Pascua, the farmers’ representative. “Technology could be used to empower coconut farmers.” Pascua’s organization has been fighting for support from the Philippine government and, especially, the Philippine Coconut Authority (PCA). So far, he said, they’ve gotten little. Pascua said he’s concerned by the PCA’s moves to expand palm oil production domestically.

“Instead of funding small-scale coconut farmers, the PCA opts to fund agribusinesses in the palm oil industry, specifically in Mindanao,” Pascua said. He said thinks the reason is that the government sees palm oil as more lucrative than coconuts. “As opposed to small-scale coconut farmers, they see more profit potential in agribusiness ventures which have thousands of hectares.”

Workers gathering coconuts in Sariaya, Quezon, Philippines. Image by Jervis Gonzalez for Mongabay.

It is a similar challenge in Indonesia. The palm oil industry, which is mostly controlled by large plantation owners and corporations, get ample government support in the form of subsidies, scientific research, and even lobbying to keep export markets open. The government actively supports funding for palm oil research through the National Research and Innovation Agency (BRIN) and the billion-dollar Indonesian Oil Palm Plantation Fund (BPDP-KS) — an entity that small oil palm farmers say unfairly subsidizes large biofuel producers.

Meanwhile, the coconut industry, despite its size, gets little. Amrizal and IACPM say they would like to see coconuts get even a fraction of the support of palm oil.

“The government puts more priority on palm oil than coconut,” Amrizal said. “Smallholders are very weak, so they rely more on the government support. If the government does not care about smallholders, in the long term, it means we will kill smallholders slowly.”

This story was supported by a grant from the Pulitzer Center.

Banner: Coconut husks and shells left in piles along the rivers in General Nakar, Philippines. Image by Jervis Gonzalez for Mongabay.

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