Coconut oil prices are expected to come under pressure as coconut arrivals start increasing from March. In Kerala, the peak season for coconut starts in February and extends up to June, while in Tamil Nadu, supplies start from March.
Trade circles estimate prices to crash by 10%-20% from the present Rs 50 per kg (as on Friday at the terminal market of Kochi) in the absence of major increase in government procurement of copra and dehusked coconut.
Currently the copra market is tight, helping oil prices to remain steady. But the market will be under pressure after arrivals increase,? Talat Mehamod, an oil trader at the Kochi market, told FE. If government agencies increase procurement from the open market, coconut oil will be steady, he added.
Coconut and copra arrivals dip from September to December, which leads to high prices in Kerala. Maximum arrivals of coconut and copra in the markets in Kerala start from January and extend up to June. This creates downward pressure on coconut and copra prices during this period.
Coconut oil prices are also correlated to prices and availability of palm oil and palm kernel oil. A study by the Coconut Development Board (CDB) has found out that households shift back to palm oil when coconut oil sells at a premium of over Rs 10 per kg. At present, coconut oil is largely consumed in south Indian states, especially in Kerala in edible form.
In other states, it is used mostly as hair oil.
According to available trade statistics, the present difference between palm oil and coconut oil prices in the open market is nearly Rs 9 per kg.
?The country witnessed a record 9.05 lakh tonne of vegetable oil imports in September 2009 against 6.67 lakh tonne during the same period last year, an increase of 35.68%. Palm group of oils comprised more than 75% of total imports,? said K Satheesh Babu of Agricultural Market Intelligence Centre (AMIC) of Kerala Agricultural University.
State-run Coconut Board has been claiming that dumping of cheap palm oil from Malaysia is hurting the local market.