Commodities

Coconut oil slips below Rs 90 a kg

| | Updated on: Mar 15, 2011
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Much to the relief of millions of consumers, coconut oil prices have fallen below the Rs 90-a-kg-mark. Prices were quoting at Rs 89 a kg in the Kerala market, while it had plunged to Rs 84 in Tamil Nadu, said Mr Prakash B. Rao, Member of the Cochin Oil Merchants Association (COMA).

Although coconut oil prices in the retail market have begun to fall, consumption has not increased correspondingly. This is because most edible oils are price sensitive and prices of substitutes such as palm oil continue to rule almost 35 per cent lower than coconut oil, sources in the market said. Palm oil was quoting at Rs 58 a kg, while palm kernel oil was quoted at Rs 96. The sharp fall in the price of palm kernel oil which was ruling over Rs 110 a kg last month has also triggered the fall in coconut oil process.

As the prices continue to drift lower, traders have begun unwinding their stocks and arrivals have been increasing in the markets. As the falling price trend persists, no trader is willing to build inventories. All fresh arrivals find their way to the the market directly.

Peak production

Although late by a fortnight, the peak coconut production season has set in over Kerala and increased arrivals are noticed in local markets. Reports also indicate that peak production season is just round the corner in Tamil Nadu, which is ahead of schedule by a couple of weeks. In this backdrop of increasing arrivals and falling off take, trade sources said, prices would soon drop to Rs 80/kg levels. Industrial buyers have also been keeping away from the market waiting for prices to dip further.

Although Kerala production can be fully absorbed by local retail demand, much of the Tamil Nadu production goes for industrial demand for production of coconut oil-based hair oils, shampoos and other cosmetic products. Exports have ceased and they are not expected to prop up prices. As the industrial demand has almost been absent in the last couple of weeks, traders expected further price falls to be precipitated from the Tamil Nadu markets, which would have a cascading impact on Kerala prices.

Published on March 15, 2011

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