Monday, November 20, 2017

Tremendos Cocos?

By on October 3, 2016

 

front-page-sep-29-titleIs it possible we could spend next Christmas without arroz con dulce, tembleque or, God forbid, coquito? No way, you have to be joking. It wouldn’t be Christmas, right?

This is the reaction any Puerto Rican would have if faced with such a question. These delicious Christmas delicacies are all made with one common ingredient: coconut cream. And we all know there are plenty of coconuts around to last us a lifetime. Right?

Well, actually, that may not be the case.

Demand for coconut products is at an all-time high, with parties—as diverse as the food, cosmetics, chemical and auto industries—with high stakes on the tropical fruit. With such great demand, the price of coconut, considered a commodity in international markets, has skyrocketed in the last few years, but particularly since coconut products became trendy—coconut water is now a sports drink; some diets include coconut oil to help lose weight; coconut milk is a dairy substitute, etc.

It would be obvious to expect Puerto Rico to be somehow cashing in on this bonanza, since it is a tropical island where there are “plenty of coconuts around to last us a lifetime.” But while the industry’s high demand for the fruit has driven its price to record highs, the world’s supply in particular, has been dropping sharply for the past 20 years.

According to a recent report in Bloomberg News, “storms, droughts and the Lethal Yellowing disease, spread by plant-hopping insects, have wiped out entire farms.” At the same time, coconut growers are opting not to invest in renovating their plantations with new trees or use fertilizers to improve the yield of their crops, which have had a negative impact on world supplies.

In Puerto Rico, the situation is not entirely different.

front-page-sep-29-pic-1Even though the island used to have a dominant role in the coconut industry in the Caribbean region as early as the 1950s, the coconut industry in Puerto Rico started floundering in the 1960s, when production started to steadily decrease. This coincided with the heyday of Operation Bootstrap, the commonwealth’s initiative to industrialize the island.

Cultivated since 1525

According to Juan R. Calderón, an economist who worked with the University of Puerto Rico (UPR) at the Experimental Agricultural Station in the 1950s, coconuts were not endemic to the island, but were brought by Spanish settlers from the West African islands of Cape Verde. Coconuts have been cultivated in Puerto Rico’s coastal areas since 1525.

In his “Study on the costs of producing coconuts in Puerto Rico (1951),” Calderón stated that during the Spanish rule, coconut production on the island was exclusively for local consumption. It was not until after the Spanish-American War and the change of rule in 1898 to the United States that coconut production started to peak.

Some historians have identified a well-known local grower around the turn of the 20th century, who had a successful coconut export business, who was known as the “Coconut Baron.” This local entrepreneur reportedly had his coconut plantation in the Piñones area of Loíza and “floated” his crops on barges through the channels and lagoons of the San Juan Estuary from Piñones to San Juan Bay, where the fruit was loaded on ships sailing for the U.S. and Europe. Nevertheless, Caribbean Business could not find any record of such an operation, even though there were at least two growers reportedly operating in the Piñones area at the time.

front-page-sep-29-mainProsperous industry during WWII

Despite the devastating effects of at least two major hurricanes during the first half of the 20th century, the coconut industry in Puerto Rico prospered mainly because of World War II. The conflict in the Pacific suspended coconut exports from the Philippines, which was also a U.S. colony at the time, to the U.S. and as a result, Puerto Rico became the main supplier. In fiscal year 1942-1943, amid the worldwide conflict, the island exported more than 10 million coconuts to the U.S.

At the time, there were two processing plants operating on the island. One processed copra (dried coconut meat) into coconut flakes, and the other used coconut water to make a soft drink.

A news report from Sept. 24, 1955 published in El Mundo newspaper, states that “Puerto Rico is exporting annually some 250,000 quintales [weight unit equivalent to 100 pounds] of coconuts to the U.S., more than any other country in the world.” The report continues that “this represents more than 70% of U.S. imports of coconuts in their nut.” However, despite Puerto Rico’s astounding number of exported coconuts at the time, about a decade after the end of WWII, the newly independent Philippines had regained its place as the main supplier of coconuts to the U.S. with “more than 90% of all imports,” including unprocessed and processed.

Back then, Puerto Rico’s total processed coconut exports had dropped dramatically to a value of just $60,000, from about $3 million for fiscal 1945-1946, the last year of the war.

Still, coconut harvesting was considered a viable agricultural industry by the local government, which was actively looking for alternatives to develop more cost-efficient production methods.

In fact, according to Calderón’s study, “the use of the data obtained in the study could contribute to increasing the profits of coconut growers and also to promote the success of the industries using it as raw material.”

Innovations in the harvesting of coconuts were then being considered by the government, such as a “mechanical giraffe,” as well as a “crusher” to eliminate the husk.

By 1964, with coconut production rapidly dwindling, there are newspaper reports of Puerto Rican innovators who patented coconut sorting and coconut splitting machines.

front-page-sep-29-rihannaAt an all-time low today

Nowadays, coconut production is at an all-time low of 1,095 quintales for 2014, the most recent year for which statistics are available. This is more or less the same production level the island had in 1824, according to Calderón’s study.

Interestingly, as recent as 2003, coconut production reached 115,785 quintales, of which 21,125 were exported. This was by far the best year for the industry in the past 25 years, despite the fact that in 2004, local production reached 144,900 quintales. Regardless, the production levels of both years are still a fraction of what it was in the 1940s and 1950s.

For Manuel Crespo Ruiz, undersecretary of Agriculture in charge of Agricultural Innovation & Commercialization, the coconut industry on the island has reverted to much lower artisan levels due to the fact that it is no longer an economically viable industry.

“Labor is expensive and the people who used to harvest the coconuts are not doing it anymore,” he said, adding that local plantations have almost disappeared, with just three known plantations left in Puerto Rico.

Crespo Ruiz explained that coconuts are expensive to grow. “It takes five to 10 years for a palm tree to give fruit, and that is a long time. In the meantime, you have to fertilize the ground, protect the plants from diseases and malicious insects, and that is costly,” he said.

Agronomist José L. Zamora, a professor at the UPR, agrees with the undersecretary in that growing coconuts is an expensive business, but argues it has become more expensive than it should be because it has been left unattended for too long.

“Low production due to diminishing farmland—along with the fact that we never had great plantations—the age of the palm trees and expensive labor have caused the loss of market share over time and that is very difficult to revert,” Zamora said.

The agronomist also mentioned an additional difficulty of redeveloping the industry, mainly the fact that “we don’t have the best palm variety” since importing “coconut vegetative material” is forbidden by law. This prohibition, he explained, is a protective measure to avoid the introduction of the microorganism that causes the Lethal Yellowing disease that affects many species of palm trees.

front-page-sep-29-coquitoProspects for growth

For Zamora, there still could be some resurgence in the industry because of the high demand for coconuts in the international markets and the possibility of intermingling a coconut plantation with other agricultural activities, such as raising cattle.

Coconut is a multibillion-dollar worldwide industry that has seen a 500% increase in demand for the tropical fruit over the past decade. According to worldatlas.com, “this is because coconut-based derivatives, such as soaps, virgin coconut oil, health products and coconut water, have all seen large spikes in demand, so much so that producers may not be able to keep up.”

Should Puerto Rico decide to re-enter the coconut market, it would be facing tough competition. According to worldatlas.com, among the top-25 producers of coconuts in the world, five are Latin American countries: Brazil (2.8 million tons a year), Mexico (1.06 million tons a year), Jamaica (310,000 tons), the Dominican Republic (286,934 tons) and Venezuela (263,867 tons).

There is also the difficulty of comparing production in Puerto Rico with that of other countries because the P.R. Agriculture Department uses the Spanish <I>quintal</I> measurement, while international markets use the metric ton and the agency does not provide a conversion formula. Still, according to estimates from the United Nations’ (U.N.) Food & Agriculture Organization, coconut production in Puerto Rico was 4,100 tons in 2007. This is a lot less than the Republic of Kiribati, an island nation in the Pacific Ocean comprised of 33 coral atolls and isles, which holds the 25th place among the world’s top coconut producers. Puerto Rico would have to produce more than 40 times what it produces today to tie with Kiribati’s 170,000 tons of yearly coconut production.

Regardless, almost the same circumstances affecting the local coconut industry also affect just about every single coconut-producing country in the world. High demand and limited supplies have in turn created a shortage in international markets that has further increased the demand on the already strained coconut plantations.

Many uses for the coconut

The coconut is a very useful plant with a wide range of products being sourced from it, from clothing and cosmetics, to animal feed. Most sought after is its oil, which is extracted, processed and marketed for culinary, medicinal and cosmetic uses. Different products require different kinds of coconuts. For example, the dried-out flesh of the coconut, or copra, from which coconut oil is extracted for use in cookies, lipstick and even as a biofuel, among other uses, is obtained from the mature fruit. Also extracted from the mature fruit, but from its fresh flesh, is virgin coconut oil. The now very trendy coconut water is obtained from the young green coconut, while the no less trendy coconut sugar is obtained from the coconut flower.

Historically, very little, if anything, of the coconut palm tree goes to waste. Even the husk of the coconut is now being used for cushioning car seats. However, the higher-value goods from younger coconuts are putting additional pressure on plantations and provoking the worldwide shortage of the fruit.

Earlier this year, The Wall Street Journal reported “farmers in the Philippines, the largest producer of coconut oil, for example, are increasingly being asked to harvest younger coconuts, as middlemen chase after the higher prices they net over fully mature ones.” As a matter of fact, according to the United Coconut Associations of the Philippines, coconut water exports more than doubled in 2015, while copra and coconut oil exports have dropped thus far in 2016.

The alternative to face the high demand would be to increase production by increasing the amount of land dedicated to plantations and renew the trees. Farmers in some countries have already increased the land they used to grow coconuts. According to the U.N., land used for coconut plantations has increased worldwide by 14% since 1994, but not necessarily in the Latin American region.

Drop in production in the D.R.

In the Dominican Republic, production has dropped by almost 60% over the past 20 years, due to adverse meteorological events, the Lethal Yellowing disease, increasing production costs and competition from other countries.

These very same circumstances have affected Puerto Rico with the aggravating fact that the island’s presence in the international markets is limited, at best. Still, the incentive to redevelop the industry is very motivating.

For example, the price of coconut today is the highest in its history.

Agriculture Department reports state the price for a thousand coconuts (millar) in fiscal 2009-2010 was $328.25. For fiscal 2013-2014, the price more than doubled at $712.33 for each 1,000 coconuts. Indeed, there is a correlation between supply, demand and price: the higher the demand, the higher the price. But even after the market stabilizes, the industry is estimated to remain viable if Puerto Rican farmers and entrepreneurs are willing to invest.

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