04/05/2010 (Financial Express), Kochi - Higher demand for palm oil and low coconut production in Philippines and some parts of Indonesia because of the drought are likely to support coconut oil prices in India in the long-term, a report by the Agricultural Market Intelligence Centre (AMIC) of the Kerala Agricultural University said.

Economic recovery in the buying countries of the US and European markets will help in higher demand for palm oil, palm kernel oil and coconut oil for the current year, K Satheesh Babu of AMIC told FE.

“Palm oil producing nations like Malaysia and Indonesia have hiked tax on export of palm oil. With the import of palm oil and palm kernel oil becoming relatively costlier, demand for coconut oil is also expected to increase,” Babu said.

He feels that the recovery of crude oil prices could trigger higher demand for coconut-based bio diesel (Coconut Methyl Ester) and help the recovery of the coconut oil market. Coconut oil lost most of the industrial users to the cheaper palm and palm kernel oil, which is almost similar in taste and flavour to coconut oil.

A study by the Coconut Board had reported that industrial users shift to coconut oil when the difference between imported palm oil and coconut oil is less than Rs 10 per kg.

On the global supply position, the report said El Nino induced drought in Philippines and some parts of Indonesia could see a drop in production in the long-term. However, domestic scenario looks bleak on the price front in the near-term due to the higher supply. AMIC has forecasted coconut price to drop by 10% in the next two months on the backdrop of higher supply.