Coconut Oil Not to Benefit from Price Rally in Other Edible Oils

At a time when rival edible oils are going north, coconut oil producers are sceptical of a price rally, at least in the short term. Several industry sources, including officials from the Coconut Development Board, told BusinessLine that there will be surplus production in the growing regions this fall due to favourable meteorological conditions in the previous two harvest seasons.

They anticipate a good harvest this year, putting further downward pressure on pricing.

Surplus Copra

In both the Kerala and Tamil Nadu markets, copra pricing has declined by 10-12 per kg in the last week, and are currently at 82 per kg. At the same time, due to excess production and the availability of copra at lower costs, coconut oil prices have fallen to 140 in Kerala and 123 in Tamil Nadu.

Farmers are in a dilemma due to the drop in copra and raw coconut prices, as there are no buyers for their product. Raw nut costs have dropped from 28 to 24 per kg in less than a month. Previously, the Tamil Nadu sector purchased raw nuts from Kerala, but they were forced to stop due to excess production there.

According to Thalath Mahmood, director of the Cochin Oil Merchants' Association (COMA), the market has been on a downward trend for a long time, with no help from local purchasers.

He believes that the National Agricultural Cooperation Marketing Federation (NAFED) should purchase copra from the open market rather than from farmers, as this would benefit the entire sector, including farmers.

Farmers are hesitant to come forward because of the procedures involved in the existing procurement of raw coconut at a floor price of 160.90 per quintal.

Mezhukkattil Mills' Ubais Ali said the last two harvest seasons had been good, resulting in a surplus of copra. This year's market availability will be improved thanks to the current fresh crop. Demand for value-added items has been sluggish in the international market, and prices were only likely to rise in response to an increase in foreign demand.

According to K.K. Devraj, a business consultant, the younger generation is switching from coconut oil to sunflower oil for health reasons. This group belongs to the middle or upper middle income level. As a result, despite the price difference, reverse migration in the group is unlikely.

Aside from that, the hotel, restaurant, and catering industry, as well as the low-income group, consume palm oil. They will switch to coconut oil at lower prices, boosting the coconut industry. However, he claims that the supply of cheaper oil from Tamil Nadu will offer farmers in that state a price advantage over those in Kerala.