The coconut industry is in ,crisis. Its major product, coconut oil, is faced by low, highly volattle, and declining prices. It has been subject to trade restrictions and strongly biased adverse publicity. The industry's research needs have been neglected by national governments and the inter-national community. Urgent action is required to revitalise the industry. Significantly, the action required is not at the farm level. Increased output of coconuts is not the answer to the industry's problems. What is urgent, is that the existing production be put to better use. The critical requirement is to modernise coconut processing. 

The coconut's continual production and robustness are rare among commercial crops. These attributes are not used effectively by the "stone-age" copra industry but are highly significant to the economics of modern coconut processing. The economic analysis in this paper highlights the still untapped potential of this existing, renewable resource to contribute to sustainable development. This is particularly important within the context of the contemporary concerns for equity in development and for the environment. 

The paper reviews the nature of existing coconut processing plants and analyses the implications of scale for raw material producers (i.e. coconut farmers) with particular reference to material preparation, transport and infrastructural requirements. Significant recent developm6nts in processing technology are then discussed. Simulation analysis of 'modern small-scale' coconut processing is undertaken. The results suggest that the recent innovations in technology could be particularly beneficial to the smallholder sector, they make far better use of the inherent economic advantages of coconuts and could greatly improve the competitive position of the industry in the international vegetable oil market. Conclusions are drawn on the implications for international coconut research priorities and the requirements for international developmental assistance.