Coconut oil prices likely to ease following increased supply

Written by Commodities Bureau | Kochi, November 5 | Updated: Nov 7 2008, 05:21am hrs
Coconut oil prices are likely to ease further owing to increased supply from Tamil Nadu and competition from cheaper palm oil, traders told FE.

As labourers report back to work after the festival holidays, production of coconut oil will increase, Talat Mehamod, a trader at the terminal market of Kochi told FE.

The production season in Tamil Nadu and other southern states starts in November. Volumes in Kerala are down as the peak season in the state ends in December. As production in Tamil Nadu increases, the supply shortage in oil and nuts will be met, noted Mehamod.

Ccoconut oil prices are down by Rs 5 per kg, from a high of Rs 65 per kg, at the terminal market in Kochi. A 15-20% decline in demand for edible oils post-Onam has contributed to the ease in prices. The critical factor for the ease, however, is the decrease in the price of palm oil, Mehamod said. Palm oil is retailing at Rs 34-36 per kg in the Kochi market (as on Wednesday), compared to Rs 59.75 for coconut oil.

Consumers could shift to the cheaper palm oil, thereby depressing demand for coconut oil, Mehamod said. Also, a further drop in palm oil prices could see the hotel and bakery sector turning to it as well, he added.

Industrial users had shifted to coconut oil when the difference between imported palm oil and coconut oil increased to more than Rs 10 per kg. A study by the Coconut Development Board (CDB) found that households shift to palm oil when coconut oil sells at a premium of Rs 10 per kg or higher.