Heavy rains in the south Indian states have firmed up the coconut oil market with prices escalating by 8-9%, traders said. Even in Tamil Nadu, where supply is plentiful in comparison to demand, prices have crept up by Rs 3-4 per kg. Continuous rains have disrupted copra making and coconut picking in Tamil Nadu leading to a tightening of supply, Talat Mehamod, a trader at the terminal market of Kochi said.
He expects the market to remain firm but is worried about the impact of the stay given by the Kerala High Court on the import ban on coconut oil through Kochi port. The directorate general of foreign trade stopped palm oil imports at Kochi port some weeks ago, where 70,000 tonne to 80,000 tonne arrive annually. Imports are permitted at all other Indian ports, but the Kochi ban has increased transport costs to Kerala, which is the only state to use coconut oil for domestic purpose.
The ban did help the coconut oil market to stabilise, but the substitution from palm oil has not been great, Talat said. The price difference of Rs 9-12 per kg has helped some conversion, but not the desired effect, he added. Price differential between the Pollachi market and Kochi market has also narrowed down considerably, he said.
While Talat and some traders bet on the market to remain firmer in the days ahead, Bharat Khona, another trader in Kochi, maintains that prices would ease with some days of sunshine in the neighbouring Tamil Nadu.
He says that the production in Tamil Nadu is the critical factor for coconut oil in the nation. ?Good rains will naturally lead to better coconut production and prices would slide as season starts by March in Kerala,? Bharat said. He is betting on the use of palm oil as feedstock in bio-diesel to help the coconut oil market. Bharat says that lesser availability of palm oil could help the Indian market to firm up, but that could happen only in the long run.