Close on the heels of hiking of MSP on copra a fortnight ago by the Centre, its rates have plummeted to ₹9,000 a quintal in Kerala, forcing the coconut farming community to seek procurement by government agencies at the earliest.
On December 22, the Centre increased the MSP for copra to ₹10,590 per quintal, from ₹10,335, for the 2022 crop season.
Traders attributed the price fall of milling copra to a host of factors including over-supply in the market in the recent period, diminishing local demand for coconut oil and, above all, surplus production of raw coconuts this year thanks to favourable weather conditions in the State.
Kerala Agriculture Minister P Prasad said that the government will procure raw coconut nuts from farmers from January 5 and has fixed the procurement price at ₹32 per kg, as the price had dropped to ₹29. The Agriculture Director has been asked to speed up the procurement initiatives through Kerafed.
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However, official sources pointed out that it would take at least one month for the the procurement to start in full swing as authorities have to make ready all necessary infrastructures before going ahead. Initially, the government has to officially communicate to the Centre for starting procurement and the Centre has to entrust an agency for the purpose.
According to sources, the industry is seeing this fall in prices in the wake of an increase in raw nut production in all major producing centres by more than five per cent this year. The production in Kerala in 2020-21 was around 6,974.50 million nuts on an area of over seven lakh hectares.
However, the crash was softened to an extent by the surging price of Indonesian raw nuts in the global market, making import from this country unviable for industrial requirements.
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Sources also pointed out that 90 per cent of the raw nut production in Kerala was used for making coconut oil and the remaining 10 per cent for value-addition.
Impact of other edible oils
Ubais Ali, CEO, Mezhukkattil Mills, told BusinessLine that the declining price trend in other edible oils has now started reflecting in coconut oil and a subdued local demand has made a further impact on the prices. Raw nut production has been registering a spurt after a gap of 3-4 years — in 2016, the sector had witnessed a bumper crop. The change in weather pattern with good rains in the last two seasons has also led to record crop, resulting in the oversupply in the market.
Moreover, a shift in the consumption pattern in coconut oil and the availability of other edible oils at cheaper rates, in the range of ₹150 per litre, has also hit coconut oil sales, he said, adding that the southward movement is expected to continue for some more time considering all these factors.
Thalath Mahmood, Director, Cochin Oil Merchants Association, said the market was on a revival mode after Onam but Omicron fear has also started hitting with a further drop in local demand. However, surplus production has also ensured abundant supply which is likely to impact copra prices further, he added.