Why “Cheaper” Is Not Profitable: The Coconut Industry’s Invisible Collapse

 

Why “Cheaper” Is Not Profitable: The Coconut Industry’s Invisible Collapse

When prices fall below production cost, economists call it a “race to the bottom.” It looks like efficiency but is often a system running out of balance. The current Thai fragrant coconut industry illustrates this perfectly.

With buying prices collapsing to just 1–2 baht per coconut, local farmers can no longer afford fertilizer, irrigation, or routine maintenance. Declining orchard care leads to smaller fruit, weaker flavor, and falling quality—eroding the margin for processors and exporters. In theory, low prices should make products more competitive; in practice, they destroy the very capacity to produce quality goods.

The problem is not oversupply alone but pricing power. Nominee owners representing foreign capital have gained control across the entire chain—from plantations to packaging and export. They push down procurement prices while Thailand’s domestic demand remains too small to bargain effectively. What appears as market competition is, in fact, a distortion of the price mechanism by concentrated buying power.

Profitability depends on value creation, not price suppression. When margins are squeezed at the farm level, quality deteriorates, costs rise downstream, and the entire ecosystem declines in productivity. “Cheaper” becomes a trap: investors gain short-term cost advantage but lose long-term product reputation and sustainability.

Consumers can shape this outcome by choosing Thai-origin brands that buy fairly and maintain standards. Supporting local producers, promoting authentic “100% Thai fragrant coconut” products, and amplifying these stories online can help rebalance demand. When international buyers recognize quality and are willing to pay for it, fair prices return—and only then can profitability sustain itself.