Prices of copra, or dried coconut, are on an upward trend due to the increase in demand from oil mills. “We are facing a shortage in the market, and the rising price trend is expected to continue till March before the starting of the harvest season in Kerala,” Thalath Mahmood, director of Cochin Oil Merchants Association (COMA) told BusinessLine .

Prices are now at ₹125 per kg (₹12,500 per quintal), from the ₹118-perkg (₹11,800 per quintal) at the time of the minimum support price (MSP) announcement by the Centre last month.

MSP, he said, is an assurance to ensure a fair price for the crop. A similar surging trend is also prevailing in the coconut oil market, with prices touching a high of ₹185 per kg (₹18,500 per quintal).

KK James, a commission agent in Thrissur dealing in coconut oil, copra and cake said that copra production was too low in Kerala, and only some tiny units are involved in the process of converting raw coconuts into copra to extract the oil to market in local brands. The average production was only 12 loads of copra (one load = 10 tonne). Traders are now forced to depend on Tamil Nadu, Karnataka and Andhra, as the shortage was around 30 per cent.

Highly placed sources said that copra-making is a losing proposition in Kerala, particularly because of the cost involved. Copra can be made by modern copra dryers, in which fuel by burning shells is a major component, which costs ₹10-12 a kg. Moreover, it is labour-intensive. However, Tamil Nadu makes copra through sun drying, thereby making a considerable saving in fuel cost coupled, with a cheap labour. All these factors could help them to make copra at competitive rates.

Currently, the raw nut prices are now ruling at ₹36 a kg, which is three times higher than the international prices. The MSP itself is an ensured price, which is more than 2.5 times higher. And so, the global competitiveness of coconut value-added products will lose.

“For the industry, the MSP is not a good decision, which would hinder us to compete with players in Indonesia, Philippines, Thailand, Sri Lanka,” the sources said, adding that in 2016-17, Indian coconut prices were lower and moved in the direction of international prices.