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Journalism of Courage
India’s annual retail food inflation rate fell to minus 1.06% in June, the lowest since January 2019. But consumers continue to feel the pinch from high prices on some items.
Among them is vegetable oils, where the year-on-year price increase reached 17.75% in June, according to the National Statistics Office.
The all-India average modal (most quoted) retail price of palm oil is currently Rs 132 per kg, compared with Rs 95 a year ago, data from the Department of Consumer Affairs show. The prices of soyabean, sunflower, and mustard oils have risen from Rs 120 to Rs 154, Rs 115 to Rs 159, and Rs 150 to Rs 176 respectively over the same period.
But the increase in prices of these oils is nothing compared to what coconut oil has seen.
Since the beginning of this year, the wholesale price of coconut oil at Kerala’s Kochi market has zoomed from Rs 22,500 per quintal to Rs 39,000 per quintal. At the retail level, the oil is selling for around Rs 460 per kg, close to double its early-January price of Rs 240-250.
This makes coconut oil more expensive now than even sesame (or gingelly) oil, a traditionally premium oil that is retailing for about Rs 425 per kg.
“Not only are coconut oil prices at all-time highs, I haven’t in my 50 years of trading seen these go up so much in such a short time,” Thalath Mahmood, president of the Cochin Oil Merchants’ Association (COMA), said.
Global factors
Tom Jose, chairman of the Irinjalakuda (Kerala)-based KSE Limited, India’s largest solvent-extracted coconut oil producer, attributes the unprecedented price rise mainly to output in the Philippines and Indonesia falling due to El Niño-induced drought.
These two countries are the world’s top producers-cum-exporters of the oil that is extracted from the dried white flesh or kernels of coconuts (Table 1).
The El Niño event, which lasted from July 2023 to June 2024, affected the growth of coconut flowers and fruit development during the 2024-25 marketing year that began in October. The impact is being felt now, as it takes roughly a year for a single coconut to go from flowering on the tree to a fully mature fruit that is ready for harvesting.
“The weather disturbances, on top of aging coconut plantations in the two countries, have led to global supply tightness, and to buyers scrambling to stock up,” Jose said. Production in India, which is an insignificant exporter, has been flat, if not down.
No immediate supply response to high prices is expected because coconut trees – even the improved dwarf and hybrid palm varieties – start bearing fruit only in 3-5 years.
The price sentiment has been further boosted by reports of the Indonesian government planning restrictions on the export of raw whole coconuts, amid concerns over the shortage of the fruit for local processors.
Meanwhile, the government of the Philippines has introduced a 3% mandatory blending of coconut oil-based CME (coco-methyl ester) in diesel sold in the country from October 2024. The blend could go up to 4% from October 2025 and to 5% from October 2026, which would reduce the exportable surplus of coconut oil further.
A marginalised oil
Of the 5.7 lakh tonnes (lt) of coconut oil produced in India, only about 3.9 lt is used for food (cooking and frying). The rest goes into the manufacture of hair oil, cosmetics, soaps, and in other industrial applications.
Like other indigenous cooking oils (mustard, sesame, groundnut, cottonseed), coconut oil has lost market share to the predominantly imported oils – palm, soyabean, and sunflower.
The three imported oils accounted for about 72% of the almost 260 lt total domestic edible oil consumption during the year ended October 2024. The only indigenous oil that has held out is mustard; coconut is low down the list (Table 2).
Even in Kerala — the state that derives its name from Kera or the coconut tree — the annual consumption of coconut oil is just 2 lt, estimates COMA’s Mahmood. That is half the consumption of palm oil (4 lt) and a little more than sunflower oil (1.5 lt). From being the top producer of coconut, Kerala has now slipped to third place, behind Tamil Nadu and the No.1 producer, Karnataka.
On the whole, the record high prices of coconut oil may not hurt that much, given the extent of its marginalisation. If anything, it may accelerate the shift to other oils, particularly imported oils.
