Value-adding process of coffee, cocoa, oil palm seen as a worry

By NATHAN WOTI
THE value-adding process of coffee, cocoa, and oil palm can reduce the value of the product and impact pricing, according to an economist.
Institute of National Affairs executive director Paul Barker said although it would seem desirable to gain greater value added from Papua New Guinea’s products, as the mark-up between the producer price and the final retail price of many (particularly agricultural) products, one must be careful to distinguish between simply processing, and value adding.
“(Because) if one’s not careful, one can reduce the value of a product, and therefore also the price to domestic producers,” he said.
“If along the process of value-adding, one degrades the value of the final product through unsuitable processing, it could impact the market price.
“A case in point is the processing of coffee, where the best coffee is roasted and ground as close as possible to the final consumer, often in the final retail outlet, with green bean the best way to ship and store the product for retention of its attributes.”
He said processing into most instant coffee was generally only used for lower-value coffee, and would be a waste of most of PNG’s Arabica coffee, which was well sought after in the market.
“Some local roasting and grinding is desirable for the local market, and for niche airfreighting,” he added.
“But the bulk of PNG’s coffee exports are best exported as green bean, with the value-adding coming from achieving the highest grades, and entering niche markets, including certified and organic markets.”
He added that many products could be processed in PNG, such as cocoa to chocolate, crude palm oil to refined palm oil and food products, surplus fruit into dried, canned or bottled and juiced products, in some cases on a large scale.
“The issue is that PNG operates in a global economy, and although the domestic market is growing, it remains relatively small (except for food).
“So most products need to be exported,” Barker said.
“Whether one is exporting or selling to the local market, the product must, however, be competitive.
“Although some products can command a premium price, like PNG’s better grades of coffee and cocoa, most products, whether crude palm oil or gold or gas, are standard products, fetching standard prices on the world market,” he said.