Coconut oil prices declined 15.3 per cent in a month on strong selling pressure, coupled with low buying support from the fast moving consumer goods (FMCG) sector. Coconut oil was today quoted at Rs 8,800 a quintal. It was Rs 10,400 a quintal in May.
According to Thalath Mehamood, president, Cochin Oil Merchants Association, the market is in a bearish mode because of the increase in production and high supply in Tamil Nadu. As the price is falling every day, FMCG majors withdrew from the market, thus affecting the demand. About 60 per cent of all coconut oil produced is used by FMCG companies. Mehamood said the price might drop further and stabilise around Rs 8,000 a quintal, as supply from Tamil Nadu had increased sharply. Interestingly, Kerala is not having much stock of copra and coconut oil, as production was halted due to heavy rain.
During April-May, overseas demand, especially from Sri Lanka, was on the rise which helped prices to cross Rs 10,000 a quintal. A serious drop in the price of palm oil, the major substitute for coconut oil, also influenced the current price drop.
The current wholesale market price of palm oil is Rs 6,000 a quintal. A majority of household consumers, especially in Kerala, had shifted to palm oil when the coconut oil price rose. The rise in the price, for the last five-six months, led to an increase in production in Tamil Nadu, the major supplier of the oil in India and this caused a supply-demand imbalance in the market. In Tamil Nadu, the wholesale price of coconut oil dropped to Rs 7,000 a quintal and copra declined to Rs 4,700 a quintal.
