While overshadowed by energy and mining investments, Papua New Guinea’s agricultural sector is both as a key earner of foreign currency and as a primary employer for many of its citizens. The country’s fertile land makes the sector and its downstream processing and value-added spin-offs the most viable option for absorbing its growing workforce, while continuing to provide potential for the economy in the long term.

In recent years weak commodity prices for some of the industry’s key cash crops have hit the sector hard, setting the stage for a rebound in 2015. Price increases for important exports such as coffee, copra, palm oil and cocoa led modest growth, which was also bolstered by the recent decline in the value of the kina.

Sector Growth

The agriculture, forestry and fisheries sector grew at an estimated 3.9% in 2014, according to the PNG Treasury Department. This was attributed largely to increases in copra, cocoa and palm oil production which offset the low copra oil production and a downgrade in coffee production. Commodity prices of the country’s key agricultural exports rebounded mid-way through the year as well, resulting in copra farmers taking full advantage of the higher prices by bringing more product to market, while cocoa and coffee were hindered by ongoing industry concerns including the cocoa pod borer (CPB), ageing trees, security concerns and poor export documentation processes that persist in the export industry. In contrast to the growth in the copra sector, copra oil production continues to stagnate primarily due to the loss of a major coconut oil processing mill which burned down in East New Britain in 2013. This trend should reverse once the mill re-opens for production by the end of 2015.

Cash Crops

Shipments of PNG’s primary agriculture export crops totalled PGK1.51bn ($571.4m) in 2013, down nearly half from the high of PGK3.02bn ($1.14bn) registered just two years earlier. Exports for 2014 were on pace to eclipse 2013 levels by a fair margin through the first nine months of the year, totalling PGK1.46bn ($552.5m) in 2014 compared with PGK1.15bn ($435.2m) over the same period in the previous year. Forestry product exports contributed another PGK624m ($236.1m), PGK613.4m ($232.1m) of which came from raw logs, while marine exports totalled PGK240.2m ($90.9m) through the first three quarters of 2014.

Palm Oil

The palm oil industry dominates the sector, accounting for two-thirds of all agriculture exports excluding the forestry and fisheries industries (see analysis). Dry weather across South-east Asia in the first half of 2014 affected supply and increased palm oil prices until they retreated in the second half of the year due to rising output from primary producers Indonesia and Malaysia. Crude palm oil and other associated product exports totalled PGK1.5bn ($567.6m) in 2014, up 24.3% compared to the previous year, according to data from the Palm Oil Council (POC).

Palm oil farmers sold another PGK20.56m ($7.78m) worth of refined palm oil and other products on the domestic market along with PGK4.87m ($1.84m) worth of oil palm seed. The largest purchaser of PNG palm products was the Netherlands, which purchased 33.0% of the output followed closely by the UK with 32.8%, Germany (22.5%) and Spain accounting for 11.7% of the total 514,757 tonnes. Data from the Bank of PNG, which calculates export data differently, placed palm oil exports at PGK903.5m ($341.9m) in 2013 and PGK880.3m ($333.1m) in the first three quarters of 2014.

Coffee & Cocoa

Coffee continues to hold second place in agriculture exports with PGK331.8m ($125.6m) in coffee beans shipped out from January to September 2014, nearly as much as the PGK336.7m ($127.4m) sold in all of 2013. While the sluggish global economy through the first half of 2014 had a detrimental effect on coffee demand and prices in the early part of the year, a long spell of dry weather in Brazil – the world’s largest producer of Arabica coffee – greatly reduced the size of crop for the year, resulting in a sharp increase in coffee prices. Cocoa exports also benefitted from the effects of the devastating Ebola outbreak in West Africa which sent prices spiking in September 2014. Fears that the virus could spread to cocoa producers in the Côte d’Ivoire and Ghana from neighbouring Liberia and Guinea never materialised and coffee shipments continued to arrive, allowing prices to subside.

Even so, the temporary price spike bumped up profits for coffee exporters from PNG, although the segment performance could improve further. “Marketing is the real challenge for the coffee industry in PNG, as at the moment our volume accounts for only 1% of the world’s production, despite the excellent quality that we are able to produce,” Anton Benjamin, the former CEO of the Coffee Industry Association, told OBG.

Cocoa exports were valued at PGK162.9m ($61.6m) through the first three quarters of 2014 after totalling PGK206m ($78m) for all of 2013. Other agricultural export crops from PNG include tea, copra, coconut oil and rubber. Over the course of 2014 coffee prices increased by 64.5% and cocoa by 10%, while copra oil prices decreased by 9.5% and palm oil decreased by 14.2% according to the PNG Treasury Department.

Top Down

In 2015 the government allocated funds for agricultural projects across a wide range of sub-sectors to expand PNG’s revenue base. More notable expenditures included the PGK141.3m ($53.5m) targeted at developing the potential of agriculture and small and medium-sized enterprises (SMEs); PGK180m ($68.1m) for the Department of Agriculture and Livestock to implement the National Agriculture Development Plan 2007-16; PGK50m ($18.9m) for the National Development Bank; PGK33.8m ($12.8m) for the Pacific Marine Industrial Zone (PMIZ) seafood processing centre; PGK50m ($18.9m) for basic infrastructure in agricultural corridors; and PGK50m ($18.9m) for the Agriculture Commercialisation Equity Fund. The latter will attract investors in the coffee, cocoa, oil palm, rubber and livestock industries. “If PNG wishes to attract investment and growth in its agricultural sector it must continue to strengthen its bio-security agency and bio-security policies in line with international standards,” Stanley Leahy, CEO of Zenag Chicken, told OBG.

Pooling Resources

The agricultural sector has also been a primary focus for international aid and development funding over the years. The largest single ongoing programme is the Productive Partnerships in Agriculture Project (PPAP), operated by the World Bank, which is targeting benefits for up to 60,000 coffee and cocoa farmers and their families.

In boosting the profitability of two of the country’s most productive cash crops, the World Bank and the government are hoping to both widen the overall economic base while at the same time improving the lot of some of PNG’s less affluent citizens. “PPAP is a hugely important initiative, designed to help thousands of growers get higher earnings from their produce,” said Laura Bailey, World Bank country manager for PNG, in a February 2014 statement. “It is also providing a critical boost to the coffee and cocoa industries which remain significant forces for the economy. In this sense, it is truly a win-win for agriculture in PNG.” Initially launched in 2010, PPAP has already shown sufficient potential for the World Bank to extend an additional $30m of funding in February 2015. This has brought the total funding package of the project to $73m spread among various donors – the International Development Association ($30m), International Fund for Agriculture Development ($22m), Foreign Private Commercial Sources ($10.1m), the European Commission ($6.4m) and $4.5m in borrowing.

These funds are being used to tackle many of the recent challenges faced by coffee and cocoa farmers. chief among them a lack of extension services in many areas; inadequate replanting with many trees long past their prime at more than 40 years old; and the devastating impact of CPB. Through the project, the partnerships between farmers and NGOs, farmer group cooperatives and local businesses are selected and established under a competitive process.

The partnerships have provided selected farmers with planting materials including high-yielding hybrid crops, extension services, access to certification schemes and other services. The additional financing received in early 2015 will allow the programme to increase the number of partnerships from 25 to 50 before the project’s scheduled closure in 2019. As of June 2015 a total of 33 partnerships had been implemented involving 27,352 beneficiary farmers with an additional 23 partnerships under preparation involving 21,500 beneficiary farmers, according to the World Bank. With the scaling up of the cocoa partnerships, a further 11,000 beneficiaries are expected to be added, bringing the expected number of beneficiaries to 59,852 farmers, which is almost equal to the project’s target of 60,000 beneficiaries. Cocoa yields among project beneficiaries have increased by 122% from a 2011 baseline production level of 169 kg per ha through December 2014, and stood at 63% of the project target.

With the further distribution of high-yielding clones and consolidation of training on best cocoa management practices, the project is now on track to meet the target of 600 kg per ha by 2019. Coffee growers participating in the programme have exhibited similarly impressive yield growth from 2011 baseline yields of 382 kg per ha to 816 kg per ha by December 2014, far exceeding the targeted yields of 600 kg per ha.

Increasing access to financing would improve the sector on a wider scale too. “The challenge for farmers, particularly smallholders, to access commercial finance needs to be addressed through the government or multilateral organisations such as the World Bank or the ADB, who could be underwriting some of the risk with the commercial banks. This has been proven around the world as efficient in creating growth in the sector,” Ilan Weiss, CEO of Innovative Agro Industries, told OBG.

Wheeling & Dealing

One of the country’s most profitable agriculture companies, New Britain Palm Oil (NBPOL), has caught the eye of some of the palm oil sector’s largest agro-industrial companies, including the Malaysian palm oil giant Sime Darby. After expanding its operations over the years through plantation expansion and buying out a number of competitors on its way, the London-listed NBPOL itself became an acquisition target for the world’s largest oil palm growers. The sale was initiated in 2014 with an offer price of £7.15 per share and consummated in March 2015 when Sime Darby Plantation Berhad, the plantation arm of Malaysia’s conglomerate Sime Darby Berhad, paid out $1.74bn for NBPOL. The purchase will add another 135,000 ha of land to Sime Darby’s sizeable land bank, pushing it over the 1m ha mark spread over five countries.

New Britain has more than 81,500 ha of planted oil palm estates along with around 7500 ha of sugar cane and another 9150 ha of grazing pasture, some of which will be converted to oil palm. It also owns 12 oil mills, two refineries, and a seed production and plant breeding facility. The company’s 20,375 head of cattle make it PNG’s top beef producer, according to Sime Darby.

National Asset

The deal was solidified after years of efforts by Sime Darby, which previously sought to purchase a smaller 20% share in the company held by the government as well as a larger minority stake from Kulim Holdings Berhad. Part of the reason the original deal had been unsuccessful in 2013 was the lower offer price of £5.50 per share, which Sime Darby increased to a 30% premium in the 2015 agreement.

While the buyout adds a good chunk of acreage to Sime Darby’s sprawling international land , it also remains consistent with the company’s focus on producing certified sustainable palm oil which allows it access to Western markets. However, prior to the takeover, which required the approval of the government owing to its status as a strategic national asset, the ownership of NBPOL was split between Kulim Malaysia Berhad, a Malaysia-based palm oil investment company holding a 49% stake; institutional and retail investors with another 24% share, NBPOL management with 5% and the PNG government and other interests with 22%.


One of the Pacific Ocean’s largest fishery zones encompassing some 2.4m sq km of exclusive water territory surrounding more than 600 separate islands, the PNG fishing industry remains a vital component of the country’s economy. The area is home to a wide variety of ecosystems providing a habitat for creatures ranging from coast-dwelling bêche-de-mer ( commonly known as the sea cucumber), to reef fish, to schools of tuna patrolling deepwater expanses, not to mention freshwater fisheries and aquaculture.

On a commercial level the National Fisheries Administration (NFA) oversees six commercial fisheries: prawn, lobster, sedentary, inshore, aquaculture and tuna. Led by the tuna industry PNG exported 50,600 tonnes of marine products (worth PGK240.2m ($90.9m)) in the first three quarters of 2014. This represented a rebound year for the industry, which exported a total of 46,200 tonnes of fishery products worth PGK234.4m ($88.7m) for all of 2013 after shipping 71,100 tonnes valued at PGK329.5m ($124.7m) the previous year.

Tuna Trade

While the smaller fisheries benefit the country by supplying local markets with fish and modest exports when their respective fisheries are healthy, the sector remains largely reliant upon the tuna trade. Boasting some of the most productive tuna catchments in the world, PNG is a member to the Parties of Naru Agreement (PNA) which fellow Pacific Island nations of the Federated States of Micronesia, Kiribati, Marshall Islands, Nauru, Palau, Solomon Islands, and Tuvalu formed to collectively manage tuna stocks, catches and market prices. By implementing a vessel day scheme (VDS) requiring foreign-flagged fishing boats to pay a daily fee to ply their waters, PNA members have been able to take in an increasing amount in fees while at the same time expanding their own domestic fisheries sector along with associated value-added services such as canning and packaging facilities.

The cornerstone of PNA management is the skipjack tuna fishery, in which the VDS system has increased revenue flowing to the eight PNA members since its inception, from $64m in 2010 to $357m in 2015, according to the PNA. The organisation set the total allowable effort (the number of cumulative days sold by member states in a given year) at 46,610 VDS days for 2015 and 45,881 VDS days for 2016, while the benchmark price set by PNG in 2015 was $8000 per day.

The NFA is also looking to capitalise on the tuna trade by bolstering its value-added services with processing and canning facilities. The focus of these efforts is the PMIZ, being developed near the port city of Lae, in which a number of large canneries are being built. These include investments in new facilities by both foreign and domestic companies such as Nambawan Seafoods, Niugini Tuna, Heilshing of China, DonWong of Korea and Sapmer of France, which will join the established Frabelle and Majestic seafood processing plants in PNG. Nambawan Seafoods Tuna is a joint venture between Trans Pacific Journey Fishing Corporation and TSP Marine Industries (TSP Livestock and Development Corporation) of the Philippines, which is planning to build a PGK36m ($13.6m), 150-tonnes-per-day tuna processing facility. Niugini Tuna is a tripartite joint venture between RD Corporation of Philippines, Fairwell Fishery Group of Taiwan and Tri Marine International of Singapore, which will build a PGK87m ($32.9m), 200-tonnes-per-day facility, according to the NFA.


The government has allocated significant funding for agriculture development, which should help the industry become more cost competitive in the long run. However, concerns remain about the direction of government policy. “Trukai is concerned about moves by the government to implement a quota system,” Greg Worthington-Eyre, CEO of Trukai Industries, told OBG. “It does not make economic sense to limit a company’s ability to grow and be profitable, yet expect them to invest heavily in a very high-risk environment.”

Even so, the agriculture, forestry and fisheries sector is expected to continue on a path of recovery, with the government projecting sustained modest growth for the sector at 3.6% in 2015 and 3.7% in 2016. This growth will come from several sub-sectors, including improvements in the cultivation of coffee and cocoa as a result of yield-boosting initiatives such as the PPAP.

Copra oil production is also expected to increase in 2015 as oil processing mills recommence operations in East New Britain. These positive developments along with the ongoing expansion in the palm oil industry and profitability of the tuna fishery should ensure that the sector will remain a significant source of growth.