Aditya Hadi, Jakarta – The coconut processing industry is urging the government to impose at least a six-month moratorium on raw coconut exports or else local producers will have to lay off workers because of a supply crunch of the commodity as their main input.
Farmers, however, refused any export controls, saying that would trap them in a low-price environment and that current global commodity price surges provide a rare opportunity to maximize income after years of depressed returns.
Coconuts have emerged as a notable driver of inflation in recent months. While typically flying under the radar, the commodity contributed 0.02 percentage points to annual inflation in March, rising to 0.04 percentage points in April, according to official data.
In East Java, Statistics Indonesia (BPS) reported a striking 24.86 percent month-on-month jump in coconut prices in April with the commodity priced at Rp 15,303 (93 US cents) per kilogram, a 57 percent increase from the same period last year.
Eliza Mardian, a researcher at the Center of Reform on Economics (CORE), told The Jakarta Post on Friday, the recent surge in coconut prices is largely driven by rising global demand, as consumers are shifting from animal-based to plant-based milk alternatives.
The shift, driven by health reasons, also targeted coconut milk, among others. Demand has also grown for derivative products like virgin coconut oil and coconut water.
Data from BPS shows that exports of endocarp coconuts surged 50.8 percent last year, reaching US$113.6 million, with the bulk of shipments heading to China.
The momentum only accelerated this year, with export values in the first two months already tripling compared to the same period in 2024.
International coconut oil price was on all time high of $2,483 per tonne in April, more than twice the price booked in the beginning of last year, according to the World Bank.
At the same time, supply constraints are exacerbating the problem. Eliza noted that some farms are operating at just 33 percent of their maximum capacity, hampered by the El Nino weather phenomenon and structural issues in the sector that most coconut farmers in Indonesia are smallholders.
"They're still using conventional techniques and facing input shortages, including fertilizers and modern technology due to a lack of capital," Eliza said.
In response to the market imbalance, the Indonesian Coconut Processing Industry Association (HIPKI) has urged the government to temporary halt coconut exports for six to twelve months to stabilize local prices that have increased by threefold in some areas since mid-2024.
"Many coconuts are being harvested prematurely, which disrupts future harvest cycles," said HIPKI chairman Rudy Handiwidjaja on Saturday, as quoted by Kumparan.
He warned that the spike in coconut prices is rippling across multiple industries, from restaurants that rely on coconut cream to briquette manufacturers that use coconut shells.
In recent months, two coconut processing firms in Riau have laid off a combined 3,500 workers as they struggle to sustain operations amid dwindling access to raw materials.
Indonesia produced the most in-shell coconuts in the world with 2023 output reaching 17.97 million tonnes according to Food and Agriculture Organization (FAO).
The country is also the world's largest exporter of coconut products, with China its number one buyer, followed by Malaysia, Thailand and Vietnam, according to International Trade Centre data in 2024.
The Industry Ministry acknowledged that despite the country's importance in the global coconut industry, it still lacks trade policies for the commodity such as export bans, levies or export restrictions (lartas).
The ministry noted that domestic demand from households and small and medium enterprises (SMEs) is estimated at 2 billion coconut pieces per year.
However, the absence of export disincentives has driven farmers to sell their products overseas, benefiting foreign processing industries at the expense of Indonesia's and putting pressure on the 21,000 workers employed in the local coconut processing sector.
"Exporters currently pay no taxes, while domestic processors are subject to income tax when purchasing coconuts from farmers. This creates an uneven playing field between exporters and the local industry," Industry Minister Agus Gumiwang Kartasasmita said in a statement on Wednesday.
Farmers' defense
The Indonesian Coconut Farmers Organization (Perpekindo) sees the recent price surge as a long-overdue opportunity for farmers who have faced decades of low margins.
Thanks to rising international prices, around 6 million farming families finally have the means to invest in replanting and improving their plantations.
Perpekindo said on April 28 that a blanket export moratorium could disrupt these positive developments, as quoted from Kontan. Instead, the group proposed that any export restrictions be paired with a guaranteed minimum purchase price of Rp 5,000 per kg at the farmer level and a clear commitment to absorb farmers' harvests.
"If the industry is short on raw materials, why not build real partnerships with farmers?" said Perpekindo chairman Muhaemin said.
"Until now, they've paid farmers low prices while selling processed products at high margins. That's not a solution, it's exploitation."
The Industry Ministry has pledged to step up dialogue with both industry players and farmers' associations in a bid to resolve the supply-demand imbalance, with a commitment to putting farmers' welfare at the forefront.
However, experts suggest a lack of reliable data on regional supply and demand hampers effective policymaking and justifies the need for short-term export disincentives, including a moratorium.