Coconut oil tops Rs 90/kg on corporate buying

C.J. Punnathara Kochi | Updated on January 05, 2011

BL05_COM2_OIL   -  BusinessLine

Coconut oil prices continue to break new records as it touched Rs 88.50 a kg in Kerala markets. Surprisingly, coconut oil was quoting at Rs 90 a kg in Tamil Nadu markets as corporate buying has become evident, even as arrivals continued to dwindle. Arrivals are expected to pick up only after the major coconut production season commences in mid-February, said Mr Prakash B. Rao, Director of Cochin Oil Merchants Association (COMA).

Corporate demand has surfaced as large companies that manufacture coconut oil-based shampoo, hair oil and other cosmetic products have begun stocking to meet their demand that is expected to emerge at the end of the winter season in North India. Production and transportations will have to be arranged for products, the demand for which will start couple of months down the line, sources in the trade said.

Copra sky-rockets

Floods and unseasonal rains have limited coconut production in neighbouring countries and India is currently exporting coconuts to countries such as Sri Lanka, Bangladesh and Pakistan, Mr Rao pointed out. This has accentuated the crisis in the country during the lean production season.

As availability continues to dwindle, copra prices have surged to Rs 64.50 a kg, the level at which coconut oil prices were reigning, couple of month ago. And NAFED is the only source of copra for the Kerala market. The price spurt in competing edible oils has also contributed to the rise in coconut oil prices. Palm oil prices have risen to Rs 65 and palm kernel prices are currently quoting at Rs 85 a kg. Palm oil and palm kernel oil prices are not likely to weaken immediately as the crop reports predict a fall in Malaysian production. There is some expectation on the part of traders that coconut oil prices could rise further following other competing edible oil prices. Given the widening margin between coconut oil and palm oil prices, there is greater likelihood of adulteration, sources in the trade warned.

Oil mills and coconut oil producers will be sorely tempted to adulterate coconut oil with palm oil as the margins have now touched Rs 25 a kg.

The temptation becomes all the more as Kerala, the biggest retail consumer of coconut oil, produces less than what it consumes. In order to protect Kerala's coconut farmers, ships carrying palm oil and palm kernel oil are not permitted to berth at its ports. These ships are permitted to berth at neighbouring ports of Mangalore, Tuticorin and Chennai from where there is large-scale transport of palm oil and palm kernel oil to Kerala these days, sources said.

Published on January 05, 2011

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