Copra is an important source of village income. In the early to mid 1990s, an estimated 527 000 people (17% of the rural population) lived in households where cash was earned from selling copra. From 2004 to 2006 copra and copra oil generated average annual export earnings of K93 million; this was only 6% of the total value of agricultural exports in this period. Most of this amount (85%) was earned from copra oil exports.
Three economic products are derived from the nut of the coconut palm: copra, copra oil and copra meal. Although coconut will regenerate naturally from seed in coastal locations, almost all coconut palms in PNG have been planted by people. In PNG, coconut is grown in environments where mean annual rainfall ranges from 1000 mm to 6500 mm. It is cultivated from sea level to 1000 m altitude; however, the commercial cultivation of coconut is mostly restricted to coastal locations. Coconut normally bears all year round, but production falls significantly during droughts.
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Adoption and history
Although the cultivation and use of coconut in PNG long predates European settlement, the commercial cultivation of coconut palms in PNG commenced in the 1880s, in the Gazelle Peninsula area of East New Britain Province. Coconut meat, dried to copra, was initially in demand for soap manufacture and later for margarine production. Plantation development expanded quickly throughout the New Guinea Islands Region because of high copra prices during World War I. Commercial coconut planting commenced in the coastal areas of Southern Region in 1907, after Australia took over the administration of Papua from the British Colonial Office.
The production and export of copra increased rapidly during the first decades of the twentieth century. Export volumes were recorded as 10 324 tonnes in 1909/10 from a planted area of 16 000 ha, 31 500 tonnes in 1921/22 and 91 500 tonnes in 1936/37. Copra was the most important export commodity from PNG during this period. In 1921/22 it contributed 90% of all exports. Copra production and export declined significantly during World War II due to very low prices and the disruption of trade and commerce. Production and exports returned to pre-war levels in the early 1950s when copra exports comprised around 70% of total exports. However, the relative importance of copra and copra oil exports has declined greatly since then. Until the late 1950s, most copra produced in PNG was grown on plantations. Smallholders produced an estimated 20% of copra in 1954/55.
From the 1950s the Australian Administration adopted policies to develop smallholder and village copra production. Increased extension activities resulted in the establishment of an estimated 75 000 ha of smallholder and village coconut palms between 1955 and 1965. Most of this development was on village land, not formal settlement schemes. Smallholders produced about 48 500 tonnes of copra in 1971, which was around 35% of national copra production. By 1975/76, smallholders contributed more than 40% of national production, a reflection of both the decline of the plantation sector and the expansion of the smallholder sector. By 1975/76 however, copra and copra oil comprised only 5% of PNG’s total exports. This decline in export share was primarily due to the development of the coffee, cocoa and mineral industries during the 1950s, 1960s and 1970s.
Distribution of production and planting
Smallholder copra production is dominated by East New Britain Province, which contributes around one quarter of total production. Other provinces that make significant contributions to smallholder production are Madang, New Ireland, Bougainville and West New Britain. Most plantation copra is produced in Madang and East New Britain provinces (particularly in the Gazelle Peninsula area). In 2005, East New Britain Province accounted for 46% of all copra produced and Madang Province 20%. Smaller amounts came from New Ireland, Bougainville and West New Britain provinces.
It was estimated in 1998 that coconut plantations covered approximately 53 000 ha and smallholder plantings about 128 000 ha. In a large proportion of these areas coconut is interplanted with cocoa, an innovation that was first pioneered in PNG in the 1950s and that increases overall economic productivity of land under coconut for both plantation and smallholder producers. Most coconut palms in PNG are of the ‘tall’ variety and many are now aged, which reduces productivity. Age is thought to be a greater problem in the plantation sector, where approximately half of coconut palms are 70–80 years old.
Levels of production
Since the 1970s, the smallholder sector has grown in importance relative to the plantation sector. In 1988, smallholders contributed around 70% of total production, and by 1998 this proportion had increased to 82%. The plantation sector has continued to be adversely affected by extreme fluctuations in world market prices and, more importantly, by the rising costs of inputs, particularly fuel and labour. The sector has also been constrained by investment uncertainty (particularly as a result of the Plantation Redistribution Scheme in the 1970s, which bought back plantation land from owners and returned it to the previous customary owners).
Smallholder producers are sensitive to variations in the export prices paid for copra and copra oil and this largely explains the peaks and troughs that have characterised PNG production levels from the 1970s to the 1990s. Very low prices between 1985 and 1995 saw copra production reach its lowest levels since the late 1940s (despite K35.4 million of government price assistance and stabilisation funding over the period 1990–95). However, price increases during the 1990s saw production increase again.
The marked decline in copra production in 1998, despite the fact that prices were still increasing, was associated with the opening of a new Copra Marketing Board copra oil mill in Madang. Since the 1960s, the proportion of copra being processed domestically into copra oil has steadily increased. By 1990, copra oil surpassed copra in total export value.
Copra production was also adversely affected by significant declines in export prices in 2000 and 2001. In 2002, copra production fell to its lowest level since 1947 and in 2003 copra production reached a historical low of less than 9000 tonnes. Deteriorating infrastructure and increasing transport costs, fewer purchasing depots, and a switch from exporting copra to processing it into oil within PNG have contributed to this decline.
Copra oil production fell in 2001, but recovered in 2003. In 2006, the value of copra oil exports (K60 million) was more than seven times that of copra exports (K8 million).
Copra meal, a low-value by-product of copra oil production, is exported for stockfeed. Copra meal exports averaged 14 000 tonnes/year during the 1990s, with an average value of K1.6 million/year.
Average smallholder yields are typically in the range 400–700 kg of copra/ha, with a mean of about 500 kg/ha. Like other export tree crops, plantation copra yields are higher than those for smallholders, with a range of 700–1000 kg/ha in nationwide surveys and an overall average of about 900 kg/ha.
Processing, exporters and markets
Copra production is labour intensive. It involves collecting fallen coconuts, de-husking and splitting them, and removing and drying the coconut meat. Nowhere in the world has coconut harvesting been mechanised. The Copra Marketing Board (CMB), which became the Kokonas Indastri Koporesen (KIK) in 2002, has always regulated the marketing and export of copra in PNG. The CMB enjoyed a monopoly over all aspects of the copra industry. However, in recent years KIK has issued a limited number of private sector export licences, mostly for copra oil.
Until recently, KIK purchased copra from growers at fixed prices at depots and sub-depots. However, between 2001 and 2005 a significant reduction in the number and geographic extent of active purchasing depots occurred, from 22 depots in 11 provinces in 2001, to 15 depots in 10 provinces in 2002, and 10 depots in 9 provinces in 2005, a reflection of the shift in copra purchasing activity from CMB/KIK to the copra oil mills. Most copra in the Islands Region is now purchased by Coconut Products in Rabaul. This change has disadvantaged smallholder producers who do not have access to the mills and who were previously serviced by CMB/KIK depots, which have now ceased purchasing.
Two large copra oil mills currently operate in PNG: Copra Oil Production Madang Ltd in Madang and Coconut Products at Toboi near Rabaul. The Toboi mill is over 50 years old and has been extensively refurbished. The Madang mill was set up by KIK, but later sold to a private company. In addition to these two mills, a number of very small operations produce copra oil using direct micro-expelling (DME) technology. The Middleton family operation on Karkar Island, Madang Province, produces high-quality copra oil that is used locally to make a number of products including soap, cosmetics and shampoo.
In 2001, 55% of the copra produced in PNG was exported to Europe, particularly to the United Kingdom and the Netherlands; 40% was exported to Japan; and 5% to Singapore. These countries were the major export destinations for PNG copra throughout the 1990s. In 2001 a major shift in the destination of PNG copra took place, with more going to Europe and less to Japan. In 2005, most copra was being exported to Germany (83%) and the remainder to Australia (8%), Singapore (7%), Solomon Islands and India. This shift in the destination of exports occurred at the same time as the rapid decline in copra export volumes, and fluctuations in the figures need to be viewed in that context. The main export destination for copra oil in 2005 was Australia, with Europe a minor destination. By 2008, most copra in PNG was being processed into copra oil and exported to Europe.
For many households, copra provides the only source of cash income, but the PNG copra industry is in crisis, with production falling sharply in recent years. Internationally, the PNG copra industry is at best only marginally competitive. Copra oil prices declined for several decades until 2001 when the price for copra increased and reached US$1130 per tonne in late 2007, the highest nominal price since 1984. Price increases have been brought about by structural changes in the world copra oil market. These have been driven by the diversion of other edible oils, particularly palm oil, away from their traditional uses into the rapidly expanding biofuel market. Nevertheless, the World Bank forecasts a significant fall in real copra oil prices through to 2015. When prices are poor, the comparatively low yields of PNG copra make it uncompetitive. The once vibrant trade in copra at the village level is now stifled by the closure of buying depots, a deterioration in roads and shipping services, increasing transport costs, and the absence of financial services to support copra purchases by private buyers.
The demand for copra is derived from the demand for copra oil and prices of the two products follow each other closely. Europe was the main buyer for copra. The European Union (EU) applied a zero tariff on oilseeds and meals (including copra), but a much higher tariff on vegetable oils (including copra oil). This resulted in a significant trade distortion that encouraged the importation of copra over copra oil and explains why the EU became the world’s largest importer of copra.
The World Trade Organization Uruguay Round led to a reduction of the tariff margin between copra crude oil and refined oil. Since then there has been a steady decrease in Europe’s copra crushing capacity and an increase in oil imports. The last Europe-based copra crushing operation (Walter Rau in Germany) closed in 2007 and there is no longer any market for copra in Europe. The copra market is now limited to buyers in Bangladesh, the Philippines and mills in other Pacific island countries (Fiji, Solomon Islands and Vanuatu). The increasing interest in copra from these countries is a reflection of supply problems facing their own industries rather than of growing international demand for copra. These markets, while not sustainable in the long term, provide PNG a few years breathing space to develop a copra industry that is based entirely on oil exports.
Beyond conventional copra and copra oil, some high-value coconut products offer better longer term prospects. These include virgin coconut oil, coconut cream, coconut timber and biofuel.