Coconut oil firms up on supply constraint

Coconut oil prices are firm due to shorter supply of copra and good demand,traders said.

Written by Fe Bureaus | Kochi | Published: August 20, 2010 1:19 am

Coconut oil prices are firm due to shorter supply of copra and good demand,traders said.

Prices would have rallied much higher but for the market intervention of the Kerala government which has been providing coconut oil at a subsidised rates through their outlets has kept it firm. While some traders expect prices to drop after the festival season,some see a scope for a rally once the government intervention ends.

The state government has been providing coconut oil at Rs 58 per kg through its outlets while BPL cardholders get oil at subsidised rate. Coconut oil closed at Rs 58 per kg on Thursday at the Kochi market. Prices corrected a bit on Thursday and Wednesday but remain higher than the rates prevailing at this time of last year.

The supply of copra and coconut oil from Tamil Nadu has dipped due to good export of fresh coconuts to Bangladesh and Pakistan,Talat Mehamod,a trader at the terminal market of Kochi said. “This has certainly helped in holding up the oil prices. Arrival from Tamil Nadu is relatively costlier compared to last year,” he added.

Talat said that demand for edible oils decline by 15-20% post-onam and prices normally tend to ease down. Edible oil consumption increase considerably during the festival period due to higher demand for snacks and other food items. Households in the state tend to substitute coconut oil and palm oil depending on the relative price difference of both. If the relative difference is higher than Rs 10 per kg people prefer using palm oil for fried snacks in wayside food outlets and bakeries.

Talat feels that the prices may remain steady even after the festival season. “Without market intervention the prices may even rally a bit. It is reported that big hair oil companies are finding it difficult to procure copra from Tamil Nadu,” he added. The futures price at the First Commodities Exchange Of India also confirms this as the September delivery of coconut oil is quoted Rs 57.55 per kg as against Rs 56.75 per kg for August delivery. October delivery is quoted Rs 58.75 per kg as on Thursday.

Supply of copra from northern Kerala is also limited and may stay short till the end of Ramadan fasting.

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