Staying cool just got a little more expensive this summer. The price of coconut oil, a key ingredient in ice cream, has soared in 2025. Looking ahead, further price gains are likely as demand continues to outpace supply.
At the end of May, the wholesale price for Philippine coconut oil delivered in Rotterdam, an industry benchmark, reached $2,800 a tonne, roughly twice as much as the year before.
Adverse weather in Indonesia and the Philippines, which together account for three-quarters of global coconut oil supplies, has negatively affected production. Ice cream prices, in turn, have risen.
According to an analysis by RIFT, a British business consultancy, United Kingdom supermarket ice lollies and cones shot up by 7.6 percent in May.
Due to its high melting point, coconut oil keeps industrially made ice cream solid for longer at room temperature. Crucially for food companies, it does so without affecting ice cream’s flavour and texture.
The global ice cream industry, worth $81bn in 2024, is now paying close attention to the market dynamics affecting coconut prices.
What role has the weather played?
Coconuts are found in the tropics, where they benefit from lots of rain and sunshine. But the El Nino weather pattern, which produces warmer-than-average sea surface temperatures across the Pacific, led to drier weather across Southeast Asia, particularly from June last year to October.
During that period, coconut farms suffered from extreme heat and droughts. Because coconuts take a year to grow, last year’s weather pattern has meant that palm trees have yielded less fruit than normal in 2025, reducing supply.
The United States Department of Agriculture expects that unfavourable weather conditions will see global coconut oil production fall to 3.6 million tonnes in 2024-2025, down 5 to 10 percent from the previous season.
Output is also likely to stay low in the 2025-2026 season, according to analysts.
Are biofuels to blame too?
In October, the Philippine government mandated blending larger amounts of coco methyl ester, a fatty derivative of coconut oil, with diesel to produce biodiesel.
Until recently, the impact of the coconut-for-diesel policy was limited. A blending target of 1 percent was introduced in 2007 and then 2 percent from 2009. But that changed last year, when Manila hiked the target to 3 percent.
The government announced a further jump to 4 percent by late 2025 and 5 percent by the end of 2026. A 1-percentage-point increase requires an extra 900 million coconuts for the biofuels market, raising demand and prices.
Last year, Philippine Energy Secretary Raphael Lotilla said: “Implementing the higher biofuels blend is a win-win solution as we promote economic growth, uphold environmental stewardship and strive for cleaner energy utilisation.”
If the Philippine government carries out its plan, it will use 4.5 billion coconuts to generate the 500 million litres of coco methyl ester necessary to meet the biodiesel target by 2026. That would amount to nearly one-third of the country’s annual crop of 15 billion coconuts.
For context, the US diverts about 40 percent of its annual corn crop into its bioethanol, a fuel made primarily from fermented cornstarch designed to lower greenhouse gas emissions.
Are chocolates eating into coconut too?
In an effort to maintain profit margins and contain costs, increasing numbers of chocolate makers have started reformulating products with cocoa substitutes. One of those is coconut oil.
In December, the US ICE cocoa futures contract surged to a record $12,931 per tonne, up a staggering 177 percent from the same period the year before. Since then, prices have come down but continue to remain elevated.
The high price of cocoa – currently trending about $10,000 per tonne – continues to be supported by crop shortages and resilient consumer demand for cocoa-based products, especially chocolate.
Coconut oil is an established alternative for cocoa butter, particularly in vegan or dairy-free chocolate recipes. And even at its elevated price, coconut oil is still cheaper than cocoa.
“I expect many confectionery and chocolate makers to substitute cocoa for coconut oil in the near term,” Felipe Pohlmann Gonzaga, a Switzerland-based commodity trader, told Al Jazeera.
Platforms like TikTok and Instagram have become another source of demand. In recent years, coconuts have been extolled by celebrities like Gwyneth Paltrow and Kourtney Kardashian for their nutritional benefits.
Wellness Mama, a popular healthcare website, lists 101 uses for coconuts, including as a treatment for insomnia, heartburn, cuts, acne, haemorrhoids, mosquito bites and sunburn.
In the makeup and beauty market, coconut oil is seen as a natural and environmentally friendly alternative to palm oil. Here too, industrial consumption is rising.
While the health benefits of coconut oil continue to be questioned, this niche source of demand is rising. And although they wouldn’t have a big impact on their own, health-conscious buyers are entering an already tight market, lifting prices.
Can coconut production rise to meet the demand?
Despite coconut oil’s growing popularity, expanding production is a difficult task.
“Unlike with other crops, coconut farmers can’t simply add acres in response to higher prices,” Pohlmann Gonzaga says.
“It takes at least a year for the trees to reach maturity and production. Deforestation concerns and environmental laws also make expansion difficult,” he added.
Like palm fruit, coconuts grow on trees in tropical areas where forests would have to be removed to plant more trees.
“The European Union deforestation regulation, for instance, inhibits the destruction of biodiverse forests in order to import monoculture crops,” Pohlmann Gonzaga said.
He also pointed out that “we’re moving from El Nino to La Nina, which tends to bring more flooding in Southeast Asia. So planting, harvests and logistics will be impacted.”
With demand for coconuts likely to remain firm and supplies constrained, he added that he does not expect the prices to come down anytime soon.
“We can expect ice cream prices to be high this summer and stay high next year,” he said.
“For ice cream lovers out there, it may be time to start looking at fruit-based sorbet substitutes.”