Indonesia is the world’s largest coconut producer with exports in coconut milk, coconut oil, coconut shell and copra meal for carbon production. Nevertheless, Indonesia is behind its competitors in terms of exports, as the vast majority of the country’s coconuts are sold in the traditional market for use in domestic cooking. This provides a clear potential for key value chain players to invest in value-added coconut products for the export market. Although East Java and NTB province are major centres of coconut production, it is seen as a low value supplementary crop and cultivation remains rudimentary. Demand for the development of integrated processing facilities (which more than triples the value of coconut) is strong but the demand from the local food industry for coconut sugar (a preferred ingredient in sweet soy sauce) remains unmet. There are an estimated 16,000 coconut producers in the targeted East Java districts of Trenggalek and Pacitan, where farming households rank among Indonesia’s poorest.

The major challenges to the coconut sector in East Java and Lombok are: (1) low productivity due to lack of Good Agricultural Practices; (2) coconut sugar is not marketed as an ‘organic’ product and as a result fetches lower prices; (3) lack of knowledge and capacity of farmers to achieve organic certification; (4) a lack of linkages to export markets; (5) the existing trade in coconut adds little value among small producers who also have limited access to capital; (6) small holder farmers are poorly linked to large-scale processors who face difficulties securing staple supplies because producers are not organised.

PRISMA is working with Big Tree Farms, PT Kai Sun and PT Arya Supra Nugraha to increase productivity of small holder farmers and to facilitate access to higher value markets by promoting organic certification of coconut sugar and introducing a business model that establishes coconut aggregation points and extension services to small holder farmers.