Abstract
The objective of this paper is to assess the equilibrium relations in the fresh nut, oil and Desiccated Coconut (DC) market in Sri Lanka with special emphasis on determining the supply and demand elasticities. To achieve this objective, the Partial Equilibrium Model (PEM) previously adopted for the Sri Lankan coconut industry was reestimated using Seemingly Unrelated Regression (SUR) method. Annual data on prices, quantities and other supply and demand related data for the period 1956-2017 were used for the analysis. The PEM captures the linkages in both production and consumption between the three markets. The results revealed that estimations are consistent with previous studies except for the income variable in demand equations for both fresh and oil markets where only the latter is statistically significant with negative coefficient indicating that oil has become an inferior good. Both the own price elasticity of supply and demand of fresh nut and oil were statistically significant with comparatively lower magnitudes whereas it was significant and higher in the DC market. When compared with the previous studies, the findings of the present study revealed that the magnitudes of the supply and demand elasticities in all three coconut markets have changed over the past decade and implications of those changes are further observed in the changes of directions of supply and demand relationships. Therefore, the coconut market model may also be extended further by incorporating other important sub-sectors as well.
Highlights
Coconut (Cocos nucifera L.), one of the four major plantation crops in Sri Lanka, is intimately connected with the Sri Lankan culture, food consumption and the economy
The coconut market equilibrium model used for this study comprises of three interrelated markets; i) fresh coconuts, ii) coconut oil and, iii) desiccated coconut (DC) and they have modelled in terms of behavioural functions, which describe the key features of production and consumption patterns
The coconut market was modelled in terms of nine structural equations and four identities that describe the characteristics of the three sub-sectors
Summary
Coconut (Cocos nucifera L.), one of the four major plantation crops in Sri Lanka, is intimately connected with the Sri Lankan culture, food consumption and the economy. Fresh nuts and coconut oil are primarily directed to the domestic market, while the destination of the DC is the export market. These products account for 70 percent, 3 percent, and 15 percent of the total coconut production in the country, respectively. >20 ac) under coconut has eroded from 25 percent in 1982 to 16 percent in 2014, while the smallholder sector has risen from 75 percent to 84 percent during the same period (Department of Census and Statistics, 2014). Since the domestic consumption is the primary objective that must be attended, at present the nuts directed to industrial processing (exportable surplus) has reduced to 30 percent which was recorded as 50 percent during the 1970s’
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