1. Introduction
Coconut palms (
Cocos nucifera) are integral to the lives of many communities throughout the Asia–Pacific region, with approximately eight million farmers in the region relying on coconuts for essential income and food security [
1]. Coconut palms are often referred to as ‘the tree of life’, since they provide almost all the necessities of life, including food, water, building materials, and ingredients for local medicines [
2,
3,
4,
5]. Coconut palms also offer environmental benefits to farming communities, such as coastal stabilisation and protection from extreme winds and tides (which are expected to become more frequent with climate change); their small canopy facilitates agroforestry with livestock rearing and other crops grown underneath [
2,
4,
6,
7]. Coconuts are generally considered a smallholder crop, with approximately 96% of the world’s coconut palms having been grown on farms that are up to four hectares in area [
8].
In many Asia–Pacific countries, coconut plantations are typically characterised by the presence of low-productivity senile palms over the age of 60, which represent large opportunity costs of foregone income, employment, food security, and foreign exchange earnings [
9,
10]. Landholders have been apprehensive about replacing senile palms due to the high costs of removing the palms and replanting the area with new crops; the duration of time before new crops yield fruit; insecure property rights; and the generally high risk-aversion and status-quo bias among coconut farmers in the region [
11,
12,
13,
14,
15]. Many government and international aid programs have been trialled throughout the region to support senile palm replacement; however, these programs have generally been ineffective at reducing the high population of senile coconut palms due to a lack of funding and long-term incentives, as well as poor infrastructure and logistics [
16,
17,
18,
19].
An alternative approach to encourage the replacement of senile coconut palms could be to create private sector demand for the palms that would minimise costs to taxpayers and international aid agencies. For example, log processing facilities within the forest and wood products sector could utilise senile coconut palms as feedstock for the manufacture of veneer and veneer-based engineered wood products (EWPs). Although there is no coconut veneer being commercially produced globally, previous research has demonstrated that veneer and EWPs can successfully be produced from senile coconut palms and substitute as feasible alternatives to conventional timber species in many applications [
11,
20,
21,
22]. Market appraisals by Peters, et al. [
23] and Faircloth, et al. [
24] have indicated that the unique attractive appearance of coconut wood and its sustainable plantation origins could stimulate high levels of consumer demand for coconut wood products. Additionally, demand for old palms could provide landholders with immediate income for this previously low-value resource, whilst facilitating increased agricultural productivity and supporting rural development goals throughout the Asia–Pacific region [
25,
26,
27,
28].
In the Asia–Pacific region, Fiji is perhaps among the nations most likely to benefit from a coconut veneer and EWP market. In recent decades, rapid urbanisation and declining interest in agriculture have negatively impacted human health, food security, employment, poverty, and the economy [
29]. This has been further hindered by Fiji’s susceptibility to natural disasters and restrictive land tenure policies [
26,
30,
31,
32]. Agricultural land in Fiji is scarce since about 70 percent of the country’s area is classified as hilly or mountainous and not conducive to mechanised agriculture. As such, improving the productivity of existing farmland has been a primary objective in various Fijian land management policies [
33,
34,
35].
Fiji’s coconut plantations represent a major component of the agricultural sector that could be dramatically improved to enhance the livelihoods of many rural communities and agricultural processors [
12,
36]. Since the 1960s, Fijian coconut exports have declined by 90%, whilst global coconut product exports have increased by over 400% during the same period [
37]. Widespread senility has been recognised by the Fijian Government as the largest contributor to low coconut productivity in Fiji, with approximately 60% of Fiji’s coconut palms being considered senile [
9,
11,
12,
38]. As a result, Fiji’s average coconut yield per hectare is currently only 65% of the global mean, whilst in the neighbouring Solomon Islands and Samoa, where less than 20% of palms are senile, the number of coconut yields per hectare exceeds the world average by 45% and 32%, respectively [
37,
39].
Fiji also has an active veneer processing industry, which is likely to benefit from the additional timber feedstock senile coconut palms could offer, due to the decreasing availability of traditional native forest sawlogs, increasing harvest regulations, and a planned 2030 end date for native forestry [
40]. If the Fijian forest and wood products sector are to finance the removal of senile coconut palms, coconut veneer and EWP manufacture need to be financially competitive; however, information regarding financial performance is scarce. The Fijian industry is therefore seeking answers to questions that are familiar in the forestry literature to support veneering investment decisions, including
Where to harvest logs on the landscape;
Which timber species and log types should be harvested;
What is the impact of scale on a mill’s financial performance?
Where is the optimal location for a log processing facility?
The objective of this paper is to provide a preliminary investigation of the capacity for veneer manufacturing to facilitate large-scale senile coconut palm replacement in Fiji. A coconut wood value chain will rely on the potential for utilisation of coconut logs to enhance the financial performance of EWP manufacturers. Since private sector decision making is driven by optimising returns on investment, a spatial and stochastic operations research (OR) model was developed to perform this financial evaluation. The paper estimates the potential scale of senile palm removal and evaluates the gross margins of veneer manufacture in Fiji under a range of facility location and log processing scale scenarios. This paper is limited to the evaluation of the financial performance of coconut veneer production since collaborative research arrangements with Fijian EWP manufacturers were still in the early stages of development and potential coconut EWPs are still being examined. Positive findings could justify further research to enhance this preliminary model to support tactical EWP manufacturing decisions about log procurement and final product manufacture, as well as improved strategic decisions about processing scale and facility location. The paper proceeds with a review of the Fijian veneering industry, followed by a description of the mathematical model developed for this case study and the modeled scenarios and variables. Financial performance results are then reported and veneering investment and senile coconut value chain implications are discussed. All financial values have been expressed in FJD (as of July 2024, FJD 1 = AUD 0.66 and USD 0.45).
2. Fijian Case Study
Forestry is an important contributor to the Fijian economy and accounts for FJD 160 million (1.4%) of Fiji’s gross domestic product (GDP) [
41]. However, Fiji is a net importer of timber products. Over the period 2013 to 2020, Fiji had an average annual trade deficit in timber and paper products of FJD 67.5 million, of which FJD 4.22 million was the average deficit in veneer and EWPs (EWPs traded by Fiji include plywood and laminated veneer lumber. The Fijian Ministry of Forestry also does not measure the imported volume of wood products) [
41].
The Fijian veneer and engineered wood product (EWP) industry has historically been dependent on native timber harvesting, with approximately 75% of the industry’s log processing volume from 2014 to 2018 having been sourced from native forests [
42]. Popular native species utilised for veneer manufacture include kaudamu (
Myristica castaneifolia.), vusavusa (
Gonystylus punctatus), and kauvula (
Endospermum macrophyllum). Over the last couple of decades, wood processing mills in Fiji have faced increased difficulties securing traditional native forest sawlogs because of decreased availability, increased costs, and stricter harvest regulations [
11,
20,
40]. As a result, the average volume of native forest logs harvested by the forest and wood products industry decreased from 107,000 m
3 in 2000 to just 21,000 m
3 in 2020, representing an annual decrease of 4% per year [
43]. The veneer processing industry in Fiji has also declined in the last few years, with the country’s total annual log processing volumes having decreased from 35,315 m
3 in 2018 to 8904 m
3 in 2022, likely owing to the increasing difficulties in securing traditional native forest sawlogs [
41]. The domestic veneering industry’s challenge to secure sufficient feedstock will also be compounded by the existing policy to shut down native forest harvesting in 2030 [
40]. As such, the Fijian veneering industry is likely to become increasingly reliant on timber plantations.
The two widely available plantation timber species in Fiji are Caribbean pine (
Pinus caribaea) and mahogany (
Swietenia macrophylla), which occupy areas of 32,504 ha and 38,322 ha, respectively, as outlined in
Table 1 and illustrated in
Figure 1. These plantation areas were calculated from spatial data supplied by pine and mahogany plantation growers in Fiji. Plantation pine and mahogany are log resources that the veneering industry is familiar with. Pine is commonly utilised in veneer production, particularly for core veneers in EWPs, accounting for approximately 25% of the veneer feedstock volume in Fiji [
42]. Mahogany only accounts for a small fraction of the country’s current veneer production but is generally used as a face veneer substitute for native species. Senile coconut palms could complement the supply of plantation pine and mahogany by offering additional log supply to mills running under capacity, whilst also offsetting Fiji’s dependency on veneer imports.
Although there is no commercial production of coconut veneer internationally, there has been a considerable amount of research conducted on its suitability for veneer and EWP manufacture [
11,
20,
23,
24,
44]. Previous empirical studies have found that coconut logs have high variability in density, which presents challenges for traditional sawmilling that are also exacerbated by small log diameters [
9,
20,
21]. Spindleless rotary veneering can produce coconut veneer and EWPs that are more uniform in density and mechanical properties than sawn wood products, whilst also minimising the volume of material lost during processing [
11,
20,
44]. Nevertheless, the mechanical properties of coconut veneer and EWPs are generally lower than commercial wood species of similar density, reducing its ability to completely substitute for conventional timber in some structural applications [
24]. Additionally, the surface has a natural roughness that requires careful gluing and moderate sanding of the final product, whilst the presence of thick-walled fibers puts additional stress on wood processing equipment [
21,
23]. While the properties of coconut veneer constrain its performance in some structural applications, its hardness, colour, and visual appeal are advantages for many appearance products and coconut can substitute for conventional wood in these applications [
11,
23].
There is a great deal of uncertainty regarding the area of coconut plantations in Fiji, with estimates ranging from 17,800 ha [
36] to as much as 65,000 ha [
38]. Shapefiles supplied by the Fijian Ministry of Agriculture and Ministry of Forestry suggested there are approximately 16,900 ha of coconut plantations on the three main islands in Fiji (Viti Levu, Vanua Levu, and Taveuni), with the majority of this area being in the southern region of Vanua Levu and the island of Taveuni, as displayed in
Figure 1 [
45]. The existing literature indicates that approximately 11% [
36] to 25% [
46] of Fiji’s coconut plantations are located on the small islands in the Eastern Division; however, these areas are not considered in this analysis.
The Fijian veneering industry has requested information about coconut veneering investment opportunities, particularly how alternative processing scales, facility locations, and log procurement strategies could impact returns. OR methods are well-suited to supporting these kinds of decisions.
5. Discussion
This paper has introduced a stochastic OR model that can maximise the gross margins of veneer manufacture in Fiji whilst accommodating uncertainty within model parameters. An extensive international review of the literature did not reveal published gross margin estimates of veneer manufacture against which the findings of this study could be compared. The model described in this paper has been targeted at decision makers who have knowledge of wood processing costs against which the hourly gross margin estimates () can be compared. The decision-making environment of a particular wood processing firm may not be perfectly represented by any of the facility locations or log processing scale scenarios reported in this paper. Whilst the model has been demonstrated to Fiji, the methodology utilised within this paper could be feasibly applied to other Asia–Pacific nations, so long as spatial data on forest areas, road networks, and potential veneering sites are available.
By summarising studies on facility location and raw-material procurement problems in general, Melo et al. [
60] indicated that the objective function in the majority of published papers is to minimise cost, which contradicts the fact that investments are usually made on the basis of profitability. Cost minimisation also seems to have been the focus of many forestry decision–support tools [
61,
62,
63,
64]. While cost minimisation can be appropriate when log properties do not significantly impact the volume or value of the end product, it is worth noting that internationally, veneer production utilizes logs spanning a diameter range from under 10 cm [
49] to 90 cm [
65]. An objective function that maximises gross margins of veneer manufacture per hour of production accounts for the processing efficiencies that arise from utilising large straight logs, as well as differences in the market value and mill-delivered log costs.
The results of the mathematical model suggest that utilising senile coconut palms for the manufacture of veneer can potentially enhance the financial performance of log processing facilities, whilst also facilitating senile palm replacement in Fiji. Out of the seven log types evaluated in this paper, senile coconut palms were found to be the most profitable for veneer manufacture, given the parameter values assumed (
Figure 3). As such,
was found to be maximised at mills when large volumes of coconut logs were procured (
Figure 4) and the distances over which the logs were hauled were minimised (
Figure 5). For example, out of the six facility location scenarios considered, processing at Savusavu and Dreketi (which are located near large areas of coconut and procured large volumes of senile coconut palms) generated the highest
, whilst Galoa and Lautoka, only situated near mahogany and pine, respectively, performed the worst.
Taveuni has been proposed as an ideal veneering location given the accessibility of coconut plantations on the island. However, the assessment revealed that this location was sub-optimal due to the large volumes of coconut, mahogany, and pine logs that needed to be shipped from Vanua Levu to achieve the remaining log volume input. The shapefiles supplied by the Fijian Ministry of Agriculture and Ministry of Forestry (which are used in this case study) only indicates 1462 ha of coconut on the island (
Table 1), which equates to approximately 40,132 m
3 of senile coconut logs in year zero (or about 2.7 years of continuous log supply at a log processing scale of 15,000 m
3/y). However, anecdotal evidence suggests there may be substantially greater areas of coconut plantations on the island. Further research should be dedicated towards verifying the area of coconut plantations on Taveuni.
Based on the 16,900 ha of coconut plantations considered in this analysis and the base-case parameter estimates of
and
(
Table 4), there is approximately 464,000 m
3 of coconut logs that could be devoted to veneer manufacture. This could be a sufficient volume to fully sustain a 15,000 m
3/y operation for approximately 31 years. In the base-case analyses, the area of senile coconut palms harvested ranged from 2400 ha (15,000 m
3/y scale at Galoa) to 16,700 ha (30,000 m
3/y scale at Savusavu), which represents a total stumpage payment to landholders of
$2.02 million to
$14.03 million over the 30-year period. These estimates are based on an average stumpage payment of
$840/ha, derived from rates paid by small-scale harvesting operations (
$20/tree for an average of 42 senile trees per hectare in year zero). Furthermore, the estimates in
Figure 3 indicate that, under base-case veneer prices, wood processors could potentially pay up to
$58/m
3 to
$363/m
3 more than the base-case coconut MDLC and still remain competitive with the alternative log types. This indicates the potential for farmers to negotiate higher stumpage prices for their senile palms.
Expanding veneer manufacture is likely to generate additional socio-economic benefits to the broader Fijian economy that are outside the scope of this paper. These include reducing the country’s dependence on timber imports, improving incomes, reducing unemployment, increasing government tax revenue, and generating carbon sequestration benefits from substituting carbon-intensive building products such as concrete, steel, and brick. Commercialising coconut veneering in Fiji may stimulate the large-scale removal of senile coconut palms at little to no cost to the government or farmers, which, after replanting, could provide additional income and food security to local communities.
Low-productivity senile coconut palms generate private, social, and environmental benefits that might be temporarily degraded after harvesting. These include carbon sequestration, mitigation of soil erosion including coastal stabilisation, protection from extreme winds, shade and cooling, and the provision of income and food to farmers [
2,
6,
7,
66]. Due to limited road infrastructure within many coconut farms, harvesting senile palms could potentially damage additional crops under the coconut canopies, further impacting farmer’s food and income generation. The Pacific Community, an international development organisation, has recently published a code of practice guideline for the responsible harvesting of senile coconut palms that can minimise the environmental, social, and economic impacts of the harvesting of senile coconut palms [
67]. However, further research should be dedicated towards quantifying the costs and benefits, which can help evaluate whether a coconut wood value chain is socio-economically beneficial to Fiji.
There are several limitations of the model that will be addressed in future work. First, the model estimates on the basis of mill-delivered log costs and residual value estimates of wholesale veneer market prices because collaborative research arrangements with EWP manufacturers in Fiji were in the early stages of development. This precluded a discounted cash flow analysis of veneer opportunities. The model also relies heavily on preliminary estimates of veneer processing parameters (e.g., recovery rates and utilisation rates) due to the lack of comprehensive localised data. A disadvantage of evaluating veneer manufacture using gross margins is that gross margins decrease with increasing processing scale due to higher haul costs; the potential economies of scale with larger facilities cannot be captured. Ongoing research is addressing the dearth of fixed and variable cost estimates for rotary veneer manufacture in Fiji. When these data are available, Equation (1) can be modified to capture economies of scale and enable estimation of the net present value of veneering investments.
Second, there is presently no large-scale commercial harvesting of senile coconuts, and further research is required to estimate appropriate stumpage prices and validate the harvest costs described in this paper. For example, the model does not currently account for the costs of top and stump disposal, which may be necessary to avoid outbreaks of the invasive rhinoceros beetle (Oryctes rhinoceros). There may also be other administrative costs (e.g., environmental management plans or goodwill payments to landholders) that have not been accommodated in this analysis.
Third, the model accounts for uncertainty within specific parameters by adopting a wide range of potential values, which resulted in large variations in and optimal log procurement decisions. This variability conveys investment risk, which may discourage coconut veneering. Further research to verify and validate model parameters will facilitate more precise estimates of the financial performance of coconut veneer manufacturing.
Fourth, the analysis assumes a constant level of competition for logs throughout the analysis since plantation owners in Fiji were unable to specify how varies throughout the landscape or may vary in the future. If the ban on native forest harvesting is implemented in 2030, it is likely that the competition for plantation logs and alternative timber resources such as senile coconut wood will increase.
Fifth, while this case study does account for variability in the small-end diameter under bark (
) by log type (distributions provided in the
Supplementary Materials), the model assumes uniformity in the other characteristics of the logs (e.g., sweep, taper, density, and quality), which may not accurately reflect the variability encountered in forestry operations. Future amendments to the model could better accommodate variability in log characteristics.
Sixth, the analyses performed in this paper have assumed that 60% of all coconut palms on each hectare are senile, in lieu of accurate distributions of coconut age profiles. This is unlikely in reality since the age distribution of coconut palms does vary between plantations, resulting in differences in throughout the landscape. This may result in a disparity between the and optimal log procurement results reported in this paper and what may feasibly be achieved. Further research should be undertaken to improve estimates of the age profile of coconut plantations in Fiji to better account for the availability of senile coconut palms throughout the landscape.
Seventh, the spatial model calculates road distance based on the shortest distance by road from the forest to the mill and does not account for road quality, speed limits, and bridge weight restrictions. These factors can be a large contributor to haul costs and can greatly influence which forest regions are harvested and the optimal location for a facility [
68,
69]. This information was not available for the road network data collected. If road characteristics data become available, the network analysis described in this paper can be adjusted to better account for the true costs of hauling logs throughout the landscape.
Eighth, this paper assumes there is sufficient shipping capacity to facilitate inter-island movements of logs. Future research should be carried out to validate the existing capacity of barges and opportunities to hire private barges for log transport.
Ninth, since the model evaluates of veneer manufacturing, the potential to value-add by utilising multiple species within a single EWP has been ignored. For example, the model has adopted a relatively low pine veneer market price, resulting in limited procurement of pine. However, pine can be used as a core veneer within a high-value EWP with mahogany or coconut face veneer. This will increase the desirability of pine procurement and will be further investigated in a future paper.