The Hindu Business Line : Coconut oil prices slip on over-supply

Increase in supply without a corresponding growth in demand for coconut oil on the one hand, and availability of other substitutes at low prices, on the other, has led to decline in coconut oil prices with a cascading effect on the prices of copra and coconut.

Such an adverse situation has emerged, by and large, from the decision to de-canalise import of fatty acids, crude palm stearin, palm fatty acid distillate (PFAD) etc, and progressive reduction on import duty on palm oil and polyolefin, industry sources alleged.

This phenomenon has reduced the demand from industrial users. Coconut oil is used for manufacturing toilet soaps, laundry soaps, surface-active agents and detergents, hair tonics, cosmetics, etc. Even the toiletry sector, especially the bathing soap manufacturers, was using coconut oil to the extent of 23 per cent of its total oil requirement until recent years.

Ever since the price started shooting up, its offtake dropped to around five per cent. In its place, palm kernel oil and other cheap oils and distillates are used and this has contributed to the fall in the demand for coconut oil, they said.

The share of coconut oil as edible oil in Kerala also dropped from 80-85 per cent to 35-40 per cent and that of palm oil has gone up to 50-55 per cent now, said Mr N Ananthan, former Secretary, Cochin Oil Merchants Association (COMA).

Coconut though included in the category of oilseeds in 1991, it does not appear to carry the same weight in the official circles like that of other oilseeds, he alleged.

Palm oil share

At the same time, if the share of groundnut oil and mustard oil in the vegetable oil pool of the country was 58 per cent and 28 per cent respectively 1979 -80, it fell sharply in 2002-03 to 14 per cent and 13 per cent respectively.

The share of palm oil and soya oil has gone up to 38 per cent and 22 per cent respectively due to intensive campaign by multi-national companies,

Besides, he said, rampant adulteration in coconut oil has hampered domestic growth and impacted consumer's goodwill. Prices moving up and down erratically owing to the unreliable crop estimates in the growing States and speculation by interested sections, have triggered totally perverse movements in prices often benefiting operators in market to an enormous extent.

Price-fixing phenomena are very complex. Retailers follow discriminatory pricing. Retailers offer at different prices to different customers ranging from Rs 50 to Rs 67 a kg.

Total production of nuts in the year 1985-86 was 6.77 billion and for 1995-96, it was 13.96 billion. Given this trend, the output for 2005-06 could also be substantially higher.

That could be the reason for the non-implementation of minimum support price (MSP) for copra even months after its announcement by the Union Government.

The Centre raised the MSP for copra to Rs 3,590 a quintal from Rs 3,570 a quintal last year.

But, no agency had commenced procurement. As a result, the copra prices in the open market now remains at Rs 3,000 - 3,200 a quintal

"No agency has initiated any step to implement the MSP", some of the growers alleged. Unlike in the case of crops such as Rubber, there is no effective lobby for the coconut growers, they said.

Under the present situation there is no possibility of having a quantum jump in the use of coconut products in the country, Mr Ananthan said. Large-scale arrivals of coconut products in the market will further hamper the prices.

More Stories on : Oilseeds & Edible Oil | Coconut & Copra

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