Coconut oil prices rally on strong demand, tight supply

Written by Rajesh Ravi | Kochi | Updated: Feb 27 2014, 09:37am hrs
Coconut oil prices are on the rally and have almost doubled y-o-y due to short supply of copra. Wholesale prices at the terminal market of Kochi touched Rs 122 per kg on Tuesday evening.

A year ago, the wholesale price stood at Rs 65 a kg and a month ago, the price was Rs 112 per kg. Normally, the price of coconut oil declines with start of production season in Kerala (February) and reaches the end of the trough during June as production peaks in Tamil Nadu and Karnataka.

India is the world's biggest buyer of vegetable oil, importing nearly 60 % of its 16-17 million tonne annual consumption.

The market is very tight and supply of copra is limited. Industrial consumers are buying whatever copra they can procure and it is driving up the price. Copra is being sold at Rs 85-93 per kg which translates to oil price of Rs 135-140. We expect the market to move up further in the days to come, Talat Mehamod, member of the Coconut Oil Merchants Association (COMA) and trader at the terminal market of Kochi, said.

Availability is very low in the market and this should mean that production is very short in Kerala. Traders are now bringing coconut from Pollachi as they find availability of nuts low in Badagara and Malapuram. The price of a coconut ranges between Rs 24-28 in the market, he added. Coconut prices have almost doubled in the past few months.COMA sources reports that competing oils like palm and palm kernel oil are also moving up.

Palm oil is selling around Rs 63 per kg and palm kernel oil around Rs 98 per kg. Kerala has also announced that its agriculture department would procure raw coconut at Rs 28 per kg. This has also added to the market sentiments.

Export of oil and raw coconut to neighboring countries like Pakistan and Sri Lanka in large numbers is also adding to demand. Talat feels that the market would ease when supply from plantations in Tamil Nadu starts reaching the market in good volume. Dorab E Mistry, an oil industry expert, estimates both palm and coconut oil market to come under pressure in the coming oil year due to good supply.