Out with oil palm, bring on the coconuts says Indonesian trade minister

May 23 Indonesia will focus its policy making on helping farmers to maximise returns from niche commodities including coconut oil and aloe vera with higher margins than other commodities like palm oil, Trade Minister Thomas Lembong said on Monday.

Coconut oil, aloe vera and bamboo are becoming more "fashionable products" especially among buyers in Europe and the America, Lembong said at the opening of a meeting of coconut producing countries in Jakarta. Indonesia's government must work to keep these products as luxuries in order to keep profits high to benefit small farmers and incentivise more investment in growing coconuts, he said.

Indonesia is the world's top palm oil producer and second-biggest coconut exporter after the Philippines. However, Lembong cautioned that Indonesia should avoid having coconut go the same way as what he called bulk commodities, such as palm oil, that lack the high margins for growers. 

"We don't want this to be commoditized - high volume but low margin," said the Harvard-educated former hedge fund manager Lembong, referring to the wide gap in value between coconut and palm oil. "We are neglecting emerging strategic commodities such as coconut, and even things like bamboo, aloe vera and other lifestyle products," he said. These products "have much greater potential as lifestyle products, as high end products, to accrue much greater benefits for farmers, than bulk commodities."

As of 2014, Indonesia had a total of 3.6 million hectares of coconut plantations, about one-third of the area currently occupied by palm oil plantations. Coconut oil trades at around $1,400 a tonne, a more than $200 per tonne premium over palm kernel oil, and more than $700 per tonne against both palm oil and soybean oil, and has been supported by concerns over weather-related shortages.

"Smallholders are not capturing a sufficient share of the profit in the supply chain," he said, adding that in future the government will devote more attention and resources to maximise returns for farmers.

(Writing by Fergus Jensen; Additional reporting by Enrico Dela Cruz in MANILA, Emily Chow in KUALA LUMPUR and Karel Luimes in ROTTERDAM)

This article originally appeared on: http://in.reuters.com/article/indonesia-coconuts-idINL3N18K330