Weakness continued to persist in the coconut oil market and the expected recovery during the Pongal season did not materialise.

The pressure on the coconut oil market, reeling under poor demand, was further compounded by weakening prices in other edible oils. Prices of competing oils such as palm oil and palm kernel oil fell by 10-15 per cent last week, sources in the trade said. Coconut oil fell to Rs 75 a kg in the Kerala market, down from Rs 78 last week. In Tamil Nadu, prices fell further to Rs 72 a kg from Rs 75 last week. Palm oil prices, meanwhile, eased to Rs 58 a kg from Rs 61, even as palm kernel oil fell to Rs 72 a kg from Rs 76 last week.

Low demand

The prime reason for the price fall was the low demand from the Kerala market. This virtually led to panic sales in Tamil Nadu, resulting in a further fall in coconut oil prices.

Industrial demand also weakened as traders began offloading their inventories in the market. When weakness manifests in the market, the industrialists have a tendency to shy away, leading to further weakening of the price.

Moreover, the companies have built sufficient inventories and further demand is likely to manifest only at the start of the summer sales, trade sources pointed out.

Futures contract

Indicating the likely trend ahead, coconut oil futures dipped to Rs 7,300 a quintal for the January contract, Rs 7,550 for February and Rs 7,600 for March. There are hardly any positive triggers in the coconut oil market at present.

The lean season in coconut production has set in over Kerala and would continue until March. Production is expected to pick up from April/May and continue until June-July. But the bulk of Kerala's raw coconut goes into cooking and very little of it gets converted into copra and coconut oil.

>cj@thehindu.co.in

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