Good supply likely to halt coconut oil rally, say traders

Written by RajeshRavi | Kochi | Updated: Dec 22 2012, 07:50am hrs
The brief rally in the coconut oil market due to unexpected demand from Pakistan is unlikely to carry on due to good supply, traders said on Friday. The crop, they said, is also affected by declining prices of competing oils such as palm and palm kernel oil. Supply of copra and nuts from Karnataka and Tamil Nadu remains good due to higher production compared to last year.

The market had gained 18-20% in the past one month due to export of edible copra and coconut to Pakistan, Talat Mehamod, member of the Coconut Oil Merchants Association (COMA) and trader at the terminal market of Kochi, said.

Coconut and coconut oil exports from India are seen increasing slowly despite good competition from the neighbouring Sri Lanka. The large migrant Kerala population in the Middle East has been a good market for exporters.

Coconut board sources said exports have shown a 50% rise in quantity and a 22% increase in value till July this year. During the 2011-12 season, 24,345 tonne of coconut, valued at around R52 crore, were shipped from India. Board officials have urged the Centre to ease the quantity restriction on coconut oil and allow its export in bulk packing through all the south Indian ports.

Mehamod feels exports to Pakistan are unlikely to continue and the market would feel the pressure of good supply in the coming days. Coconut oil prices were quoted R66.50 per kg on Thursday evening, compared to R56-58 per kg a month back.

Competing palm oil was quoted at R48.50 per kg while its close substitute, palm kernel oil, stood at R52 per kg.

Malaysian palm oil prices have dropped so far this year as stocks picked up in Indonesia and Malaysia and demand slumped due to the economic slowdown.

Experts estimate Indian edible oil imports to rise more than 4 % to 10 million tonne in the 2012-13 (November-October) marketing year as domestic output lags rising demand.

Dorab E Mistry, a veteran oil industry expert, expects both palm and coconut oil market to come under pressure in the coming year due to good supply.