Coconut Oil Prices Firm on Low Palm Oil Imports.

Kochi: Low import of palm and coconut oil in the last oil marketing year that ended in October has kept the domestic coconut oil markets firm.

Coconut oil prices have been rising in the last few weeks and have breached the historic high of Rs 74.50 per kg seen in 2005. Low availability of copra cake—used for extraction of coconut oil—in the global market has also aided in the rally.

According to data provided by the Solvent Extractors Association of India (SEAI), import of RBD palmolein, crude palm oil and coconut oil have been down in 2009-10.

Import of coconut oil is lower by almost 400% during the year while import of crude palm kernel oil is only marginally more by 2,000 tonne. Palm kernel oil is a very close substitute to coconut oil and substitution takes place at very thin difference.

Globally, experts believe that prices of edible oil could rise in the coming months due to lower production of soyabean, sunflower and rapeseed oil.

Increase in corn and wheat prices lead to shifting of land under oil seeds to grain and this trend is expected to intensify in 2010-11 due to heavy speculation in grain. The weather could also be a spoiler in the days to come with the La Nina factor reducing rains in Brazil and Argentina , which could lead to lower production of soybean seeds.

Analysts of the global edible oil market are of the view that coconut oil production during 2010-11 (November-October) would remain lower but compensated by an increase in palm kernel oil.

“The price of copra cakes in the global market has more than doubled. India imports a lot of copra cakes for it solvent extraction units,” Anand Menon of SEAI told FE.

Market for lauric oils, which comprises of coconut oil and palm kernel oil, is trading at very high prices.

In the domestic market, supply of copra and oil has also been lower due to a variety of factors. One section of the traders feel that massive exports of fresh coconut into neighbouring countries like Pakistan, Bangladesh and Sri Lanka has reduced domestic conversion into copra.

The relative difference in prices of palm oil and coconut oil is also major factor in consumption of coconut oil. A large difference in price in favour of palm oil prompts a shift by household and hotel industry to the cheaper option depressing demand...

Source : financialexpress.com