Coconut oil prices remained high in Kerala and Tamil Nadu markets at Rs 89 a kg.

Sources pointed out that the convergence of the Kerala and Tamil Nadu prices could be an indication of potential instability: Coconut oil prices most often rule higher in Kerala than in Tamil Nadu markets.

Traders were expecting a delay in the advent of the peak coconut production season, which usually starts by the middle of February. They pointed to the long and protracted monsoons, which carried into the winter months, and said that the cold weather in Kerala and Tamil Nadu could delay the onset of the peak coconut production season. Unless increased arrivals come into the market, the prices are likely to remain high, they added.

The relatively high price of palm kernel oil — ruling at Rs 97 a kg — is also likely to influence coconut oil prices. Palm kernel oil has several industrial uses, like in the manufacture of biscuits and paints, Mr Prakash B. Rao, Member of Cochin Oil Merchants Association (COMA), said.

If palm kernel oil prices go up or if coconut oil prices plunge, he said, some of these industrial consumers might be tempted to switch from palm kernel oil to coconut oil. This would be led by the price differential rather than user specifications.

Palm kernel oil prices were ruling as low as Rs 37 a kg a couple of years back.

There is a shortage of copra in the market with hardly any arrivals in Kerala markets and decreased arrivals in Tamil Nadu markets. The prices are ruling at Rs 63 a kg. The industrial users of coconut oil, hair oil and other cosmetic manufacturers are in the market making purchases when prices dip. The presence of industrial buyers is expected to become more predominant as winter wanes over North India.

For the moment, coconut oil prices are expected to inch up or remain firm unless the peak season arrivals hit the market or there is a significant correction in the price of palm kernel oil, sources in the trade said.

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