Coconut oil prices have plunged as traders are quickly unwinding stocks even as buyers have stayed away.

Industrial buyers and retail sachet producers are keeping away from the market as arrivals continue to mount at major coconut-oil markets in Tamil Nadu, Mr Talat Mahmood, President of the Cochin Oil Merchants Association (COMA) said. Demand from Kerala has been flat as traders have leftover stocks from the Oanm season and some consumers had shifted over to palm oil when coconut oil prices had climbed to Rs 100 a kg.

Coconut oil prices, which were quoting at Rs 80 a kg in Tamil Nadu's wholesale markets last week, opened weak at Rs 72 on Tuesday morning before falling further to Rs 68, Mr Prakash B. Rao, Vice-President of COMA said. Coconut oil was quoting at Rs 80 a kg in Kerala's wholesale markets. Copra, which was quoting at Rs 50 a kg in Tamil Nadu on Tuesday morning, fell further to Rs 48 as the trade progressed. Copra was quoting at Rs 52 in Kerala.

Corporate buying is completely absent as they are on wait-and-watch mode on the sidelines, Mr Mahmood said. He expected the market to weaken further before it recovers and added that the bearish trends are likely to continue for a fortnight.

With the market under pressure, traders who have been holding stocks are now unwinding and selling in the falling market. This has only added to the weak sentiment in the market. There is liquidity pressure as traders are moving from stocks to cash so that they can re-enter when prices stabilise at lower levels, trade sources said.

The corresponding fall in palm oil and palm kernel oil prices is increasing pressure on coconut oil. Palm kernel oil, which was quoting at Rs 74 a kg last week, is now quoting at Rs 67, while palm oil has fallen to Rs 54. Coconut oil also goes through the cycle of ups and downs and the recent rally when it touched Rs 100 has come after a gap of five years, Mr Mahmood said.

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