Copra shortage puts coconut oil on boil

Currently, the oil is trading at around Rs 92-93 per kg in the wholesale markets, up almost 85% from last year and double the historical average price of the oil in the Indian market. Trade sources told FE that the market is firm and likely to rally further, aided by global cues.

Availability of coconut and copra has fallen drastically in the southern states leading to a scramble for the nut and its oil. Arrivals at the terminal markets are so low that the price of coconut and its oil has risen to record levels. Traders said that production is down by 50% in Kerala while in other southern states like Tamil Nadu, output of both coconut and copra are also down.

According to the coconut development board (CDB), production would be lower by 20% due to unfavorable weather. While heavy rains negatively affected palm flowering as also fruit-setting in Kerala, it was poor rainfall in some coconut-growing districts of Tamil Nadu that has resulted in lower crop there.

K Satheesh Babu of Agriculture Market Intelligence Centre of the Kerala Agricultural University said that weather has impacted the nut production. AMIC studies show that rains in November and December affected flower setting and productivity.

?Drought and consequent high temperatures because of El Nino last year affected the health of trees. Followed by heavy rains this year, production has declined substantially,? he said.

Normally, coconut oil prices eases after the peak consumption period, which is during onam in Kerala. Coconut oil is consumed mostly in Kerala and certain parts of southern Karnataka and Goa. Interestingly, this time around coconut oil prices began their strong upward rally after the festival period.

Coconut oil prices in the domestic market have been moving in tandem with oil prices in the global market where prices of lauric oil, which comprises of coconut and palm kernel oil have surpassed the rise seen in other edible oils. Production of copra and crushing of coconut oil has been lower in Philippines in 2009-10 because of climate change.

This coupled with higher price for palm oil and palm kernel oil in Malaysia and Indonesia has aided the rally in coconut oil. Analysts expect coconut oil production in 2010-11 oil years (November-October) to remain lower but will be compensated by the increase in palm kernel oil.

It is reported that export of coconut to West Asia and neighboring Bangladesh has also doubled in the recent past. Higher price of the substitute palm oil and palm kernel oil have helped in the firming market of coconut oil.

Palm kernel oil is a very close substitute for coconut oil. It is also used in adulterating coconut oil when the price difference is huge. “The government effort of procuring copra and coconut has also worked in favour of the coconut market. Even the price of white oil or paraffin oil, which is non-edible, has contributed to the rally, as it is used in adulterating coconut oil,” a trader said.