Sri Lanka’s coconut industry, on top of a continuing gap in raw material supply, has also been impacted by the ongoing Middle East crisis and rising freight and input costs, even as export earnings and production recorded gains in 2025. Moreover, industry stakeholders say that while global demand for coconut-based products remains, these logistical disruptions and structural issues within cultivation have impacted the industry’s growth.

According to Central Bank of Sri Lanka (CBSL) data, Sri Lanka’s coconut production increased to 3,040 million nuts in 2025, up from 2,790 million in 2024. However, production declined after October 2025. Coconut production also recorded a notable year-on-year increase during the January–February period this year, partly due to the base effect following the sharp decline in production in early 2025. 

Meanwhile, the industry saw a record high growth in exports in 2025, earning $ 1.2 billion. The sector continues to perform well with coconut-based exports recording a 20.76% increase during the first quarter of 2026 compared to the same period last year.

Industry affected but stable

Speaking to The Sunday Morning Business, Coconut Development Authority (CDA) Chairman Shantha Ranathunga noted that the coconut industry was currently undergoing a somewhat turbulent period in trade, although the sector remained stable.

Conflict in the Middle East and other tensions in the region have disrupted shipping routes significantly, causing many to reroute, increasing both transit time and cost. Ranathunga noted that king coconut exports had been among the worst affected segments, as the majority of exports was directed to the region. 

In order to diversify the market in the midst of this, the CDA has recently held discussions with a Pakistani delegation that had expressed interest in purchasing Sri Lankan products.

According to Ranathunga, approximately 12–14% of the industry’s exports have been affected by the conflict. However, he highlighted that the industry had also seen some positive developments, including a better harvest, and noted that the demand for coconut products only continued to increase globally.

Nut production growth

One main issue for the industry is the lack of sufficient coconut nuts, regardless of improved capacity. Sri Lanka’s Coconut Triangle currently contributes around 70% of national production, and efforts are underway to develop the Northern Coconut Triangle covering districts such as Jaffna, Mannar, Kilinochchi, Mullaitivu, and Vavuniya.

Looking ahead, Sri Lanka has set several national targets to be achieved by 2030, which include increasing annual national production to 4,200 million nuts and an export income target of $ 2.5 billion.

Coconut Cultivation Board (CCB) Chairman Dr. Sunimal Jayakody noted that several ongoing programmes had been established to support these targets, including the fertiliser distribution programme using Muriate of Potash (MOP) fertiliser stocks received from Russia and distributed digitally to farmers through a nationwide initiative. April was also designated as the Coconut Fertiliser Month.

He also highlighted the ongoing Coconut Land Rehabilitation Programme that has received a budget allocation, of which around 90% will be directed towards the major Coconut Triangle due to the importance of the soil conditions in these regions for improving yield.

Industry impact not substantial

Meanwhile, Exporters’ Association of Coconut-Based Substrates (EACBS) Executive Committee member Chamara Udayanga noted that exports to the Middle East mainly consisted of coconut kernel products, including desiccated coconut and a considerable volume of coconut husk-based products.

However, he noted that exports to the region accounted for only around 10–15% of total export volume.

While the direct impact on exports within the sector has not been substantial due to the relatively low export volume to the region, he said that the overall increase in freight costs due to fuel price increases, transit disruptions, and longer shipping routes had increased production costs and export prices.

According to stakeholders, nearly 98% of Sri Lanka’s coconut products are based on locally sourced raw materials. However, Udayanga noted that the industry still faced a significant cultivation gap.

“We are yet to receive the required yield. In the past, we experienced production of close to 3.3 billion nuts, a figure which dropped during the last couple of years. However, production improved again in 2025. Still, overall nut production remains insufficient to match the current export sector potential. The export market is larger. Ideally, annual production should be around 4–4.5 billion nuts,” he said.

Udayanga also noted that the Government was preparing a national strategic plan for the sector at present with the involvement of industry stakeholders alongside the three main State institutions: the CCB, CDA, and Coconut Research Institute. One goal of this plan is achieving a harvest of over four billion nuts by 2030.

Speaking on immediate solutions, he noted that improving productivity within existing lands through fertilisation, irrigation, incentives, and awareness programmes could help increase yields within the short term.

Cost increase and land fragmentation 

Meanwhile, Lanka Fruit and Vegetable Producers, Processors, and Exporters Association Board Member and former Chairman of the CCB Saman Dewage noted that most of the country’s fresh products went to the Middle East and the Maldives, while value-added products mainly went to Europe, the US, the UK, and Australia. 

As shipping activity is currently low, freight and insurance costs have risen sharply, while local transportation costs have also increased, adding to the cost of production. 

“At the same time, fertiliser prices, agrochemical prices, and other input costs have increased by more than 20%. Coconut fertiliser that was around Rs. 9,000 has now increased to around Rs. 12,000–13,000. However, the prices of the final products are declining due to relatively low demand in the world market,” he said.

He further noted that increasing labour costs had also affected agricultural production costs across the board.

Dewage added that these conditions were discouraging growers from expanding cultivation, with farmers reluctant to invest because their income had dropped. Coconut prices have come down sharply compared to last year as well, adding to these pressures.

Commenting on cultivation issues, he noted that progress on recent expansion and rehabilitation efforts in existing estates had also weakened to some extent.

“There are several reasons for this, including low labour availability along with high labour costs; lack of planting materials; issues such as attacks by wild animals such as monkeys, porcupines, elephants, and wild boars; drought conditions; and changing weather patterns. There was a drought for nearly four to five months until around April. More than 95% of our coconut estates are rain-fed. Thus, new cultivation and seedling growth were directly affected,” he noted.

Dewage added that Sri Lanka needed to expand cultivation continuously to maintain national production levels. According to him, every year, at least 10–12% of new cultivation is needed, especially since a certain percentage of coconut lands are lost for different development purposes.

Highlighting concerns over the land fragmentation that impacted the country’s production, Dewage noted that weak implementation of land laws had contributed to the loss of coconut estates.

“Even though laws exist, they are not properly implemented. Coconut estates of over 10 acres are not supposed to be fragmented, but people still find ways around it. Stricter laws are needed to prevent the fragmentation and conversion of coconut lands. We need a better land use plan and a proper land fragmentation law,” he added.

The needs of the industry

Meanwhile, an industry stakeholder engaged in value addition, who wished to remain anonymous, said that while the Middle East crisis had disrupted several established shipping routes used by the sector, the region itself was not among the largest markets for the coconut substrate industry, compared to countries such as Japan, China, Korea, the US, and Canada, as well as South American markets.

“However, the market has declined and the cost has increased due to shipping costs, insurance, and other price escalations,” he added.

Commenting on cultivation challenges, he noted that Sri Lanka’s coconut yields still remained below international standards despite the country having around one million acres of coconut land.

“The industry has only been receiving around three billion nuts or less in the recent past. That means on average, the yield is around 50 nuts per tree annually. However, it is much higher in competitor countries such as India and Brazil. This is mainly due to poor maintenance and lack of commercial-scale plantation management, where most plantations are around 50 acres or less,” he said. 

He too pointed out that fluctuating coconut prices had discouraged growers from investing further in cultivation. Growers are not receiving even Rs. 100 per nut at present, and thus it is not considered profitable by many.

At the same time, the industry stakeholder highlighted several solutions that were available, such as interplanting and intercropping, in order to better utilise land. He added that despite such solutions and other strategies being discussed for years, their implementation remained weak.

However, he highlighted the industry’s export potential despite the raw material shortage and other bottlenecks. The country’s domestic consumption is substantial. He noted that the industry generated around $ 1 billion in export revenue with a limited amount of nuts and opined that this growth could be heavily expanded if more nuts were available for the industry.