Coconut oil prices rise 6% in a week on supply crunch

The prices of coconut oil are inching towards the historic mark of Rs 10,000 a quintal as the south Indian market is facing supply crunch of the commodity as well as copra.

According to leading wholesale traders the retail price of coconut oil had already crossed Rs 100 a kg and the wholesale price is likely to cross Rs 10,000 a quintal mark within the next couple of weeks. The wholesale price at present is Rs 9,000 a quintal, which was Rs 8,500 a quintal a week before.

There is acute shortage of copra in Kerala and Tamil Nadu, the major producing states of the country and the demand is on a rise, especially from leading FMCG makers like Marico and Ayurvedic oil manufacturers.

Leading FMCG companies are in queue in copra producing hubs in Malabar region of Kerala, offering Rs 7,000 a quintal. Still, they are unable to keep their inventory steady as the supply is very limited in Malappuram, Kozhikode and Kannur districts of Kerala. The Cochin Oil Merchants Association (COMA) quoted Rs 6,150-6,200 a quintal, but millers and big corporates are not getting copra even at a price of Rs 6,900 -7,000 a quintal.

Thalath Mehmood, former president of COMA said the highest price for oil was Rs 7,460 a quintal in 2005. Since then the market was moving in a range of Rs 5,000-6,000 a quintal. The price decreased sharply in 2006-2009, hence coconut farmers neglected the crop and shifted to other highly remunerative crops like rubber, coco, nutmeg and fish farming. Due to this coconut production in Kerala dipped 50 per cent in the last five years and lead to serious shortage for coconut.

Coconut production in Kerala would pick up in February only, till then the prices of coconut, copra and oil will be high. The lean season in Tamil Nadu also aggravated the supply crisis and the production in this state would pick up by April-May only.

At Kankayam, India’s largest copra and coconut oil market, the price of good quality oil peaked to Rs 9,000 a quintal. Leading Kochi-based dealers told that there is good demand for coconut from abroad, especially West Asia and Bangladesh. For export purpose, coconut oil is in good demand as coconut-based cosmetic products are popular in West Asia, Europe and the US. So there is a huge demand-supply mismatch for all coconut-based products.

Also, prices of alternative edible oils like palm oil, sunflower oil are also high at present. Price of palm oil which is mainly used for edible purposes in south India increased to Rs 75 a kg. Prices of sunflower oil and gingelly oil are also in the upper circuit, hence shifting from coconut oil to other edible oils is unattractive.