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March 26, 1999


Kochi, Kangayam (TN), Bombay vie for coconut futures centre

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D Jose in Thiruvananthapuram

Central Kerala town Kochi, a major trading centre for coconut oil and copra, is likely to face stiff competition from neighbouring Tamil Nadu in securing the coconut futures trading centre.

The government has recently decided to allow futures trading in the commodity.

Kerala's coconut fields -- losing the edge? The coconut traders in Kerala and Tamil Nadu have started vying for the market leader status following the announcement.

While the Kerala Oil Merchants Association claims that Kochi deserves to be considered as the futures trading centre in the light of its past experience, traders in Tamil Nadu feel that it is time they should challenge the Kochi's position, as the trade there has been witnessing a decline.

The Tamil Nadu traders say that upcountry buyers have been increasingly turning to Kangayam where the local coconut oil milling industry has grown by leaps and bounds over the past few years.

They claim that Kangayam has been selling more coconut oil than the two major centres in Kerala.

The traders in Kangayam have been trying to move out of Kochi's sphere of influence in determining prices and assert the town's position as market leader.

The Kangayam traders have been upset with the wide fluctuation in prices in Kerala, which worked to the detriment of coconut oil trade in Tamil Nadu.

"We were tied up with Kochi, as there were no major coconut oil trading centres in Tamil Nadu till recently. But now the situation has vastly changed with the milling industry at Kangayam, Tiruchi and Pollachi in Tamil Nadu growing wide. The volume of sale in these centres is more than that of Kerala," said a coconut oil trader from Tamil Nadu.

Kangayam started emerging as a major trading centre in the '80s with the spread of coconut cultivation in Tamil Nadu. There are a few hundred drying yards and oil mills in the area.

The bulk of the coconut oil trade at Kangayam goes to states like Maharashtra, Karnataka, Gujarat, West Bengal and Madhya Pradesh.

The traders in Tamil Nadu have several distinctive advantages compared to their counterparts in Kerala. The tax on copra is only one per cent in Tamil Nadu while it is four per cent in Kerala.

Further, the cost of land, labour and transportation is cheaper in the neighbouring state compared to Kerala.

Moreover, the comparatively high productivity and large size of plantations and farms in the neighboring state are other advantages that have helped Tamil Nadu in gaining control over the trade, which once was a monopoly of Kerala.

The Cochin Oil Merchants Association, which has been demanding futures trading in coconut oil and copra for long, claimed that Kochi has a right to have the futures trading centre due to its past experience.

The association said that it had experience in conducting futures trading from 1956 to 1971 under the supervision of the Forward Marketing Commission. Before that, from 1935 to 1956, speculative trading had been conducted in coconut oil by the association without any government control.

The Bombay Oil Seeds and Oil Exchange has also staked its claim for futures centre. Their main argument is that the futures trading centres for all oil and oilseeds should be located in one place.

The Central government had stopped the futures trading in 1971 due to large-scale hoarding and artificial pricing. However, the market situation now has vastly changed.

The wide price fluctuations between season and off-season have affected the growers and the millers.

The government hopes that the past aberrations can be eliminated as computers and stricter controls can make futures trading more transparent, according to former Coconut Development Board chief development officer P K Thampan.

He said that the futures trading would be beneficial to both growers and the traders.

Kerala's Economic Survey for 1998 had acknowledged that the state was losing ground in production, productivity and trade of coconut and coconut products.

It said that though the area under coconut cultivation in Kerala has been steadily going up, it has lost its leading position in the production of nuts, with its 41 per cent share of national production.

Kerala, which accounted for 95 per cent of the supply of milling copra in the late '80s, is steadily losing ground to Tamil Nadu.

The survey said that Kerala was lagging behind in productivity compared to the national average. While the productivity per hectare in Kerala is 5,849 nuts, the national average is 6,887.

The survey said that the prices of copra and coconut oil which were for a long time decided by the market trends in the Cochin market, are gradually being dictated by the new assembling centres in Tamil Nadu and Karnataka.

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