Broker Dealers, Auctions, and Other Players in Sri Lanka

As we are committed to providing transparency all along the coconut supply chain, today’s blog post is about the role of plantation owners, brokers, sub-brokers, auctions, producers, traders, and other terms that make up the coconut supply chain. These apply to the Sri Lankan coconut market and do not necessarily reflect conditions in other countries. 

Plantation Owners: Ground zero for coconut production. The plantation owners own the land and employ labor to collect the physical coconuts from their fields. Typical plantation size may vary, from a few hectares to several hundred hectares. Plantation owners may sell directly to a processor, or they may sell to a broker, or sub broker who will then resell the nuts in an auction market. As you may suspect, quality varies across geography and owner, you can expect the nuts from certain established plantations to fetch premiums on the auction market. 

Broker/Sub Brokers: These parties bring the coconuts to market. They travel from plantation to plantation and organize the logistics and transportation of the nuts to auction market. In addition to serving certain geographical regions, these brokers are the eyes and ears on the ground. These brokers are often the source of information that gets floated through the grapevine. 

Auction market: Is held every Thursday at the Coconut Research and Development Authority. These auctions take place in a large chamber, is moderated by an auctioneer, and is attended by the procurement departments of different processors. The industry is collegial, and the heads of different processors and plantations all know each other. Therefore, there seems to be a localized value system when certain buyers bid on certain plantations nuts. 

Producers: These organizations own the processing facilities, mills, and employ the labor that creates the various coconut products. In Sri Lanka, it’s relatively rare to see one producer with everything (oil, flour, chips, desiccated, milk, cream). Instead, most specialize in two or three and achieve economies of scale. To our knowledge, the oldest producer has been in business for almost one hundred years, and newcomers are relatively rare because of the capital expenditure required to set up factories. If there are new comers, they are usually a secondary business to a wealthy businessman who seeks to penetrate the coconut market. Producers export directly to the international market, while some may sell to traders along the way. 

As always, drop us a note with comments or questions, we are always happy to expand on our findings and talk out what we see on the ground.