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Coconut oil prices are rising sharply in Asia, led by India, the world’s largest consumer, where prices have tripled over two years.
The increase is driven by tight supply and growing demand for nutrient-rich coconut water, turning this traditional household oil into a premium product.
The oil has become difficult to afford for price-sensitive consumers. Even consumers accustomed to its distinctive flavor in regional cuisines are now looking for alternatives.
Leelamma Cherian from Kerala in southern India said she plans to switch to cheaper refined sunflower oil for daily cooking and reserve coconut oil for dishes where its flavor cannot be replaced.
The price rally began in the second half of 2024 and accelerated because of production disruptions in major producing countries from India to Southeast Asia.
Lower rainfall, prolonged heat, and greater pest and disease damage all contributed to the shortage.
In India, prices have almost tripled to a record 423,000 rupees, or $4,840, per metric tonne, while global prices reached a historic high of $2,990 per tonne during the same period.
The International Coconut Community expects growing demand and production limits to keep prices in the second half of the year within the $2,500 to $2,700 range, far above the 2023 level of around $1,000.
Supplies in Southeast Asia usually improve in the second half of the year as the new harvest season begins, which may ease prices slightly from record levels, according to a Singapore-based vegetable oil trader.
Globally, coconut oil production is declining as trees age, replanting programs remain insufficient, and farms face shortages of improved seed varieties, according to Dorab Mistry, director of India’s Godrej International.
USDA data shows global production at 3.67 million tonnes in 2024/2025, with little growth over the past three decades.
Climate volatility, from prolonged droughts to sudden heavy rains, is disrupting output, according to Joe Ling, executive director of Malaysia’s Linaco Group, a major supplier.
He said extreme weather affects at least one producing country at a time. If drought does not limit output in Indonesia or Malaysia, typhoons may disrupt production in the Philippines, and vice versa.
Yields fell in 2023 due to El Niño, which brought higher-than-normal temperatures and lower rainfall to key growing regions.
Because coconuts need nearly a year to mature after flowering, the impact of the shortage appeared more clearly in 2024.
Years of underinvestment caused by low prices, combined with lower demand and prices during Covid-19 lockdowns, led some farmers to neglect plantations.
Yields then declined just as demand recovered strongly, supported by social media promotion of the health benefits of coconut water.
Higher demand for coconut water encouraged farmers to harvest fruit early, reducing supplies of mature coconuts used to produce oil and copra.
The price gap between coconut oil and rival palm kernel oil, both produced in Asia, has widened to a record $1,000 per tonne, compared with the usual $100 to $200 range.
Palm kernel oil prices have also risen by 30% this year.
While coconut oil is popular in Asia, demand for copra products, coconut cream, and coconut milk is strong in Britain, China, Europe, Malaysia, the United States, and the UAE.
To benefit from growing demand, Indonesian farmers are increasingly exporting whole coconuts instead of extracting oil, according to Amrizal Idroes, vice chairman of the Indonesian Coconut Processing Industry Association.
Government data shows Indonesian coconut oil exports fell by 15% between January and June, while shipments of products such as desiccated coconut and coconut charcoal rose by 58% year on year.
The shortage has triggered calls for trade policy changes to make more supply available for domestic consumption.
In Indonesia, the industry association has called for a six- to twelve-month halt on coconut exports to stabilize prices.
In India, the Solvent Extractors’ Association has asked the government to allow imports of coconut oil and copra.
India imposes strict restrictions on coconut oil imports, including tariffs above 100% and permit requirements through state trading agencies, making imports expensive.
High prices have encouraged farmers to expand planting, with seedling demand rising so strongly that most nursery stocks were exhausted this year, according to an official at India’s Coconut Development Board.
However, new plantations need four to five years to begin producing, making a near-term price decline unlikely.
An official said prices are unlikely to fall below $2,000 soon and may not drop below $1,800 per tonne over the next two years because neglected plantations, unfavorable weather, and tight supplies of similar lauric oils are delaying production recovery.
Higher prices are also affecting green coconuts used for their electrolyte-rich water, as well as copra, milk, and powder products.
They are also putting pressure on shampoo and skincare companies that rely on coconut oil because of its lauric acid content.
Source: Economic Times