Abstract
The Sri Lankan coconut industry is facing intense competition due to increasing demand from local consumption and export processing while fresh nut production is stagnating. The situation is aggravated during weather extremes especially with prolonged droughts. The recent prolonged drought of nearly two years was the cause for temporary closure of processing industries and soaring nut prices. It may take more than a year to re-establish normal yield even with the onset of rainfall in October. Therefore, importation of coconuts as a strategy was explored in this study. An Equilibrium Displacement Model (EDM) was used to quantify the possible economic impact and its distribution among industry stakeholders. The results indicated that allowing imports is economically viable for the processing industries to recover their losses. Under the simulated scenarios where input substitution is a policy condition to be zero, reducing the costs of processing of desiccated coconut through fresh nut importation reduces the losses to the processors and exporters from 15.5 LKR million per year to about 5.5 LKR million per year. Consumers of desiccated coconut exports are also better off by around 45 LKR million under the above scenario of a price reduction of fresh nuts from 43 LKR to 32 LKR. However, still there are concerns for the existence of markets produced from foreign material and export substitution. Moreover, the compliance with the quarantine regulations especially for the risk of pest and disease outbreaks remains unresolved. Therefore, dehusked-coconut importation is still not an option for a severe coconut shortage while other semi-processed products may remain potential alternatives.
Highlights
Coconut is a rain-fed perennial crop cultivated in nearly 20 per cent of the arable lands in Sri Lanka
Since the recurrence of such climate extremes cannot be ignored in future, it is worthwhile to consider the possibility of importation of de-husked nuts, kernel or copra as an alternative to cater for the industry demand for coconuts
An Equilibrium Displacement Model (EDM) of the Sri Lankan coconut industry developed by Pathiraja (2017) and reported in Pathiraja et al, (2017) was used to quantify the economic impact of possible nut shortage and de-husked nut importation
Summary
Coconut is a rain-fed perennial crop cultivated in nearly 20 per cent of the arable lands in Sri Lanka. The coconut industry has experienced a prolonged drought over the past two years, and according to the predicted yield for 2017, it is nearly a 17.5 per cent reduction from that of previous year. This is about equal to the yield in 2010; currently the export demand is comparatively high with respect to the situation in 2010. The demand for fresh nuts is comparatively high, and there is a significant shortage in the market of around 250 million to 650 million nuts for the processing industries (both local and export processing). Since the recurrence of such climate extremes cannot be ignored in future, it is worthwhile to consider the possibility of importation of de-husked nuts, kernel or copra as an alternative to cater for the industry demand for coconuts
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