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Palm Oil vs Coconut Oil: 5 Key Facts & Opportunities in SEA

Updated: Mar 26


A producer processes coconuts, highlighting the dynamic competition between palm oil vs coconut oil in Southeast Asia -Koltiva.com

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Executive Summary 

  • Southeast Asia dominates the global coconut industry, with Indonesia and the Philippines as the top two producers, contributing 17.19 and 14.93 million metric tons respectively (Seasia, 2024). 

  • Palm oil yields significantly outpace coconut oil, with a hectare producing approximately 2.9 tonnes of palm oil compared to 10–15 times less for coconut oil, driving its rapid expansion as a preferred agricultural commodity (Our World in Data, 2021). 

  • Southeast Asian governments, particularly Indonesia and Malaysia, have implemented strong policy incentives, such as tax holidays and infrastructure subsidies, to bolster palm oil cultivation and biofuel industries(UN, 2021 & World Argo Foresty, n.d.). 


As palm oil vs coconut oil remains a central debate in Southeast Asia's agricultural landscape, the coconut industry is undergoing significant changes amid palm oil’s expanding dominance in the global market. These shifts present challenges for smallholder producers but also create opportunities for innovation and adaptation. According to Andre Mawardhi, Senior Manager of Agriculture and Environment, coconut producers can strengthen their resilience by diversifying products, improving yields, and adopting sustainable practices to tap into premium markets.


Understanding how the competition between palm oil and coconut oil is reshaping the industry is crucial to ensuring the long-term sustainability of coconut farming. Here are five key facts that highlight the impact of this transformation. 

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1.Major Production Hub 

Southeast Asia holds a critical position in the global coconut industry, with Indonesia and the Philippines at the forefront as two of the top producers. According to the most recent data from the Food and Agriculture Organization of the United Nations (FAO), updated in 2022, Indonesia is the top coconut producer globally, with an estimated output of 17.19 million metric tons. The Philippines follows closely in second place, producing approximately 14.93 million metric tons (Seasia, 2024).  While Indonesia focuses primarily on exporting coconut oil, the Philippines is a major exporter of coconut water and milk (neliti, 2020). Together, these nations provide a substantial portion of the world’s coconut supply, solidifying the region as a vital player in the international coconut market. 


On the other hand, the palm oil industry has experienced rapid expansion, quickly emerging as a dominant force in recent years. This growth can be attributed to several factors. Firstly, Palm oil yields are significantly higher than other alternatives. A single hectare of land can produce approximately 2.9 tonnes of palm oil—around four times more than options like sunflower or rapeseed oil, which yield roughly 0.7 tonnes per hectare, and 10 to 15 times more than popular alternatives such as coconut or groundnut oil (Our World in Data, 2021). This efficiency has made palm oil an attractive agricultural commodity. 


Additionally, Southeast Asian governments, particularly in Indonesia and Malaysia, have implemented various policies and incentives to support palm oil cultivation, recognizing its potential for economic growth. For example, the Indonesian government has introduced several incentives aimed at bolstering both the palm oil and biofuel industries. These include tax incentives, interest rate subsidies, subsidized infrastructure for processing, storage, and market access, as well as a tax holiday facility (UN, 2021 & World Argo Foresty, n.d.).  


According to Andre several policies in Southeast Asia have been implemented to facilitate palm oil production, particularly in Indonesia and Malaysia. In Indonesia, the Smallholder Palm Oil Replanting Program (PSR) focuses on increasing smallholder productivity by replacing old or unproductive palm trees with high-yielding seedlings. Additionally, the Palm Oil Plantation Fund Management Agency (BPDP-KS) provides support in the form of training and agricultural machinery (alsintan) to enhance crop yields and reduce operational costs for small producers. Meanwhile, Malaysia has introduced various incentives and subsidy schemes, including replanting programs and producer training, to improve harvest yields and optimize production processes. Beyond direct support for farmers, both governments also offer investment-friendly regulations, such as tax incentives and streamlined licensing procedures, to attract businesses in the plantation sector. 


As a result of these favorable conditions and supportive policies, projections suggest that Indonesia's palm oil production could increase by as much as 124% by 2030 (Cifor, n.d.). In the Philippines, a similar upward trend is anticipated, particularly within the foodservice sector, which is a major consumer of palm oil products (MPOC, 2023).This collective growth underscores the increasing importance of palm oil in regional economies and highlights its role in shaping both domestic and international markets. 


 2. Displacement of Coconut Farming leads to economic challenges 

The rise of the palm oil industry, backed by substantial government subsidies, has significantly impacted coconut sales. (Dialogue Earth, 2023). In recent years, the Indonesian government dedicated significant funding to palm oil biodiesel production. In 2020, for example, $195 million was allocated to support biodiesel producers as part of the country's economic recovery measures after the pandemic. This financial backing has allowed major agribusinesses to keep their prices competitive against other oils, such as coconut oil (Mongabay, 2020). As a result, the heavy government support for palm oil has exacerbated the economic challenges faced by smallholder coconut producer, who lack similar financial backing, leaving them unable to scale up production or compete with the lower prices of palm oil in both domestic and global markets. 


The report shows that one major challenge for smallholders is the lack of capital to cover high input costs like fertilizers and pesticides. Many rely on microfinancing or high-interest money lenders, with rates reaching 10-20% per month. Limited access to formal credit due to physical distance, high transaction costs, and complex processes further complicates their situation. In 2020, only 6% of the $116.5 billion in loanable funds from banks went to agriculture, falling short of the 10% mandated by the Agri-Agra Reform Credit Act (Now You Know, 2023). 


3. Limited Land and Production Scale 

Smallholders in the coconut oil industry typically manage small plots of land, often less than two hectares, which significantly limits their production capacity. This makes it challenging for them to compete with the palm oil industry, where large, industrialized plantations dominate, enabling far more efficient large-scale production. In regions like Sumatra, coconut farming has been increasingly displaced by the expansion of palm oil and paper pulp plantations, shifting the main centers of coconut production to eastern Indonesia and parts of the Philippines. (Dialogue Earth, 2023). 


4. Imbalance in the Global Market 

Although smallholders in Indonesia and the Philippines produce significant amounts of coconut oil, their export volume is minimal compared to palm oil. The growing global demand for palm oil, along with government support for expanding the palm oil industry, threatens the future of smallholder coconut farming. (Dialogue Earth, 2023).Indonesia and Malaysia together dominate about 85% of the global palm oil (GVR, 2023 & Statista, 2024, with their exports far surpassing those of coconut-producing nations, driving global prices and market dynamics in favor of palm oil. 


5. Low Coconut Product Prices  

Producer in the Philippines are facing significant challenges due to the historically low prices for coconut products, making it difficult for them to sustain their livelihoods. Coconut oil prices have dropped sharply, leaving producers with minimal earnings from copra or whole coconuts. According to Procurement Resource, crude coconut oil prices in the Philippines dropped by approximately 6% over a six-month period, despite experiencing some mid-quarter price increases. This situation is worsened by the rise of palm oil, which has become cheaper and more widely available, replacing coconut oil in many Southeast Asian markets. (Procurement Resource, 2024 & Mongabay, 2020).  In the first half of 2023, palm kernel oil prices dropped significantly, averaging $998 per MT, compared to coconut oil's average price of $1,010 per MT (Coconut Community, 2023). 


To navigate the evolving landscape of the coconut industry, Andre mentioned that smallholder farmers can leverage innovation and adaptation strategies to enhance their competitiveness and sustainability. One key opportunity lies in product diversification, where farmers can move beyond selling raw copra or coconut oil by producing value-added products such as virgin coconut oil (VCO) and and utilising by-produts such as biochar and cocopeat. By utilizing coconut waste efficiently, they can adopt circular economy practices, minimizing waste while creating additional revenue streams. Additionally, improving productivity through better farm management, increasing yield per hectare, and integrating agroforestry systems allows farmers to generate supplementary income while enhancing soil health and biodiversity. Furthermore, obtaining certifications such as Organic and FairTrade can help smallholders tap into niche markets, where sustainably produced coconut products command premium prices. By implementing these strategies, coconut farmers can build resilience, increase profitability, and ensure the long-term viability of their industry. 


Palm Oil vs Coconut Oil: Supporting Southeast Asia Producers’ Resilience  

Amid growing challenges, KoltiTrace offers a critical solution for smallholder coconut producers by enhancing traceability across the supply chain. This platform helps secure better market access, strengthen bargaining positions, and highlight sustainable practices, allowing producers to stay competitive in the face of shifting industry dynamics. 


Our Role in Supporting Sustainable Coconut Farming in Southeast Asia 

Koltiva plays a crucial role in enhancing the efficiency and sustainability of coconut farming in Southeast Asia through its digital solutions. According to Michael Wijaya, Head of Data Collection & Climate, Currently, Koltiva is actively engaged in a project in partnership with one of our clients, integrating three of its key applications—Farm Retail (FR), Farm Cloud (FC), and Farm Extension (FX)—to support various aspects of data collection, monitoring, and reporting in the coconut supply chain. 


“One of the core functionalities of the FX application in this project is facilitating data collection from producers and conducting multiple surveys that provide critical insights into the supply chain. These include chipping monitoring surveys, seedling demand surveys, planting and monitoring surveys, and tax report surveys. The chipping monitoring surveys are particularly valuable in tracking when coconuts are chipped by producers, ensuring that collectors have real-time data on harvest readiness. This process improves efficiency in collection and distribution while reducing waste,” said Michael. 


According to him, the seedling demand survey and the planting and monitoring survey are part of an integrated cycle designed to enhance seedling distribution and tracking. Producers begin by submitting their seedling requests through the survey, which the client carefully reviews and processes. After distribution, a thorough planting and monitoring survey is conducted to evaluate seedling condition, survival rates, and overall growth progress. This systematic approach not only ensures that the seedlings are used effectively but also enables timely identification and resolution of any growth issues. 


The ultimate goal of this monitoring process is to oversee the complete flow of farmer participation—from socialization, registration, and selection, through distribution, planting, monitoring, and finally harvesting. This end-to-end monitoring is crucial for developing a sustainable coconut plantation, as it ensures that every step in the process contributes to the overall success and long-term viability of the plantation. 


“The data collected through these surveys is then compiled into reports that Client downloads and shares with its retail partners. This enables targeted seedling distribution, ensuring that approved producers receive the necessary resources to improve their productivity. The distribution process is facilitated through the Farm Retail (FR) application, where producers update the received seedling data using Farm Cloud (FC). These updates are then linked with Farm Extension (FX) to provide continuous monitoring of planting and seedling development,” continued Michael. 


He also stated that Koltiva is currently developing a dashboard for seedling demand and distribution monitoring. This dashboard will allow client to track the distribution progress across different provinces, ensuring transparency and optimizing the seedling allocation process. By leveraging our digital solutions, the client can make data-driven decisions that support the long-term sustainability of coconut farming, benefiting both smallholder producers and the broader supply chain. 


KoltiSkills, Our Extension Service 

We complement technology with hands-on support, providing end-to-end solutions for sustainable coconut production through our extension service, KoltiSkills. 

  • Supply Chain Mapping & Verification Producer surveying to map the origins of your products, verify farm production practices and emissions, and ensure compliance to sustainability standards and ever-changing regulations, such as the European Union Deforestation Regulation (EUDR). 

  • Training & Coaching Group training to raise awareness of sustainable practices and one-on-one coaching to support producer households in implementing their farm development plans. 

  • Business Support Engagement and capacity building for supply chain actors, including local aggregators, cooperatives, financial service providers, nurseries, and other agri-input suppliers. 

  • Certifications Preparation  Koltiva becomes the one-stop shop to prepare producers to achieve sustainability certifications, such as Rainforest Alliance, RSPO, 4C, and FSC. 


Through this initiative, Koltiva is not only improving operational efficiencies but also driving sustainability by ensuring producers receive the resources they need to enhance their agricultural practices. By integrating technology with field operations this initiatives by our client aims to contributing to a more resilient and transparent coconut supply chain in Southeast Asia. 


Explore how KoltiTrace empowers smallholder coconut producers Talk to our experts today and discover solutions to build resilience, improve market access, and ensure a sustainable future for the coconut industry!


 

Writer: Kumara Anggita, Content Writer

Editor: Bobby Hermawan, Head of Digital Marketing and Daniel Prasetyo, Head of Public Relations and Corporate Communications.


About Writer:

Kumara Anggita, serving as Koltiva's dedicated Content Writer, brings a wealth of experience from her six-year tenure in journalism in the fields of humanities and lifestyle, as well as her role as a writer in the tech industry. Her deep-rooted passion for gender equality and sustainability spurred her to enhance her reporting and storytelling skills through the EmPower Media Bootcamp by UN Women. Now, Kumara utilizes her platform to advocate for sustainable practices and gender equality through her compelling writing.


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