Oil mills see better margins as copra prices likely to fall

Coconut oil mills may soon get a reprieve with industry insiders estimating a 20-25 per cent fall in copra prices over the next two months.

Things have been difficult for millers this year owing to a sharp rise in copra prices. However, analysts expect a good harvest in the new season beginning mid-February and subsequently an increase in supply.

“We had been working on a very thin margin ranging between 5-10 per cent. Although, prices of coconut oil increased, margins remained under pressure due to high copra prices,” said Deepak Sharma, vice president (marketing & sales) Raj Oil Mills Ltd (ROML), the producer of the Cocoraj brand.

Kerala Ksheera Karshaka Sahakarana Federation (Kerafed), the state apex co-operative federation of the farmers co-operative societies and the owner of the popular coconut oil brand (Kera) also feel that copra prices may decline. According to a senior federation official, they were forced to raise coconut oil prices by 10-15 per cent last month, but will pass on the benefits to the consumer once copra prices come down.

Most branded coconut oil producers in Kerala, including KPL and Nirmal, had increased oil prices last month. The expected fall in copra prices could help them increase their margins. Prices of coconut oil has almost doubled in the last one year, surpassing the level of Rs 9,000 a quintal a week ago. According to M.J. Kuriakose, director and former president of the Cochin Oil Merchants Association (COMA), large quatities of coconut are expected to reach the market wiping out the current shortage within a couple of weeks.

“Coconut oil prices may come down by 25-30 per cent and the market is likely to stabilise at around Rs 6,500 a quintal. The next coconut production season in Kerala will be active within a couple of weeks,” said Kuriakose.

However, Saugata Gupta, CEO (consumer products division) of Marico – the producer of the Parachute brand – said: “It is very difficult to predict price trends at this point in time.” With the estimated price fall of copra, leading coconut oil brands are planning to tap new markets.

Raj Oil Mills (ROML) has roped Krushnaa Patil – the youngest woman to conquer Mount Everest – as the brand ambassador for Cocoraj.

ROML plans to enter West Asia with a marketing tie-up with a local player by June. “Gradually, we will rebrand all our edible oil products to increase our market share,” said Arif I Tharadra, a senior company official. Bomi Doctor, ROML’s marketing consultant, said the company plans to invest Rs 100 crore on re-branding and re-packaging of edible oil brands over the next 15 months.