In exactly one year, we have witnessed an increase in the price of coconut oil, Coconut, copra and Coconut oil cake from its lowest to highest (so far). We are all talking about it because the price growth has been a whopping 3 times! So, I will try to put some of the wisdom in hindsight on its effects on various stakeholders. Not many in this industry, including us, would have been prepared for this change that seems irreversible now. Till now, inflation has happened on most commodities except Coconut.

Farmers
The price increases should naturally bring cheer to the farmers. But this Time, it didn’t bring them the desired cheer. The price increase is not because of the increasing demand but more because of the scarcity of the commodity. If the farmer had grown 100 nuts last year, sadly, he would have only grown 50 nuts this year. So, despite the 3 times increase in price, his income has only grown by 50%. Farmers have also witnessed similar inflation in the cost of their farm inputs, such as labour, fertilizers, water, and so on.
Farmers generally don’t aspire to grow coconuts as much as they do for other cash crops like Arecanut and Rubber. They only cultivate coconuts for their own consumption and for plant diversity on their farm. Justifiably so, as the coconut price was way below his cost of production. This price increase should rekindle their interest in taking coconut cultivation more seriously. If they do, this should be a great boon for the entire coconut industry.

Usage
Coconut Oil finds widespread use in household cooking, baking applications, soaps, hair oil, body massage and so on. In a few of these applications, there are no easy substitutes and the demand is inelastic. That is why price is continuing to rise unabated.
Coconut from trees was used earlier mostly for making copra and, hence, coconut oil. The price of Coconut and copra was mostly driven by coconut oil and palm oil. Now, the scenario is likely to change. Coconut Oil millers find that the coconuts cultivated don’t come as copra to their factory doors. Instead, Coconut is plucked while it is tender; the yield of coconut trees is also higher when tender Coconut is plucked. Mature coconut (often immature) is used extensively to make Desiccated Coconut. The remaining Coconut that is still dried into copra again finds usage as edible copra (good shape and colour) at a higher price. The residue is available as copra for milling.

Coconut Processor
Profitability-wise, it has been a great period for coconut traders and processors. They buy raw materials, and when they are about to sell the finished goods, the price would have increased. The more stock one is able to hold and the faster one is able to complete the processing cycle, the better the profits are. Earlier, the price increase brought with it some caution; what if the price comes down tomorrow? Now, it has become highly predictable. But it has not been all that rosy.
Working Capital required has increased proportionally. For those with limited working capital, his ability to hold stock has been reduced. A certain level of stock is required to maintain production quality (e.g., times required to dry copra and filter oil through sedimentation). Minimum stock is required to meet sudden demands and ensure supply just in case production has been disrupted. While discussing this with a vendor, he told me about his customers in the coconut oil industry. Those who were once paymasters when it comes to vendor payments have now been delaying his payments.

Adulteration
Extent of adulteration is directly proportional to the price difference between Pure Coconut Oil and its adulterants. Palm Kernel Oil is the often used adulterant owing to its similarities with Coconut Oil. Many other malpractices also go along with adulteration like Underweight and Sales in Black.

Consumer
It is the consumer who has been badly hit by this price increase. He is obviously forced to pay much more. Also, he has to consume adulterated products. In order to keep his expense on cooking oil within budget, he will try substitutes like Palmolein Oil and Sunflower Oil. Worst thing to happen will be when he has changed his edible oil for good, when he doesn’t buy coconut oil again even when the price has come down.

Coconut Oil, compared with other edible oils
Coconut Oil will join edible oils like Ghee, Gingelly Oil and Groundnut Oil as premium, local cooking oils. A place where it rightfully belongs. It should be consumed because people want to consume it and not because it is cheap. Each one of them has a cheaper substitute: Vanaspati for Ghee, Ricebran Oil for Gingelly Oil, and Palm Kernel Oil for Coconut Oil. Palmolein Oil, Sunflower Oil, Soyabean Oil, Cottonseed Oil and Rice-bran Oil will be available to the masses.