Government Moves to Control Rising Coconut Oil Prices amid Shortage

• 5opn1
• November 3, 2024
• News, Political
• Coconut Oil Prices
• 0 Comments

The government plans immediate action to control rapidly rising coconut and coconut oil prices in response to a supply shortage and high local demand, Agriculture Ministry sources disclosed.

Local shortages have heightened the urgency to stabilise the domestic coconut oil market, as supplying coconuts domestically is challenging and unlikely to be resolved quickly, a senior official noted.

Global edible oil prices have surged, with refined coconut oil prices rising from US $1,320 to $1,880 per ton and palm oil prices nearing $1,250 per ton, impacted by climate conditions and international demand.

In Sri Lanka, refined coconut oil prices recently jumped from Rs. 630 to Rs. 700 per kilogram wholesale, with retail prices reaching Rs. 1,350 per liter. These increases are straining local market, leading to import cheaper oils

The ongoing Russia-Ukraine conflict has sharply reduced sunflower oil prices, benefiting India through increased imports.

In contrast, Sri Lanka faces rising coconut oil costs, prompting the government to consider relaxing restrictions on palm oil imports to offset costs and encourage coconut product exports.

Since 2022, palm oil imports have required licenses, but with coconut oil imports adding about $3.5 million monthly to Sri Lanka’s foreign exchange outflow, this restriction could be temporarily lifted to save an estimated $50 million annually.

Local oil refiners favor crude palm oil imports, while distributors prefer refined types. By meeting demand with imported oils, coconut oil prices could stabilise.

However, government officials must act promptly to avoid delays, as relaxing import restrictions could also raise government revenue under the current import tariff structure.

Sri Lanka’s edible oil imports have plummeted due to high freight costs, affecting palm, vegetable, seed, and coconut oil imports.

With freight charges escalating because of the U.S.-China trade conflict, importers are struggling to clear containers, with some even hoarding stocks in anticipation of shortages.

Customs and other regulatory bodies have also been criticized for preferential treatment, with small importers facing prolonged delays.

The country consumes 10,000 metric tons of edible oil monthly, yet production has halved due to economic challenges and reduced purchasing power.

Local production currently meets only 4,000 to 5,000 metric tons monthly, causing importers to secure additional stock at higher costs.

As container freight costs have increased from $15-20 to $35-50, importers have begun to rely on smaller vessels to manage shipping expenses.

Of the 240,000 metric tons of coconut oil consumed annually, only 40,000 tons are produced locally, with the remainder blended with substitute oils.

Over 90% of Sri Lanka’s food processing companies rely on palm oil, which is also an ingredient in over 60% of supermarket products.