Rising ice cream prices this season attributed to increased costs of coconut oil, an essential component
Summers are getting hotter, and wallets lighter, thanks to a steep increase in coconut oil prices. This essential ingredient for ice cream is becoming more elusive, sending the cost of cool treats soaring. By the spring of 2025, wholesale coconut oil prices reached an eye-watering $2,800 per tonne—double the previous year's rate. Climate change is to blame, as El Niño-induced droughts ravaged major coconut-producing nations such as the Philippines and Indonesia, accountable for 75% of global coconut oil supply.
The impact of these droughts isn’t just limited to ice cream lovers. The cost of producing industrial ice cream also jumped due to coconut oil's high melting point and neutral flavor. UK supermarkets reported a 7.6% rise in prices for ice lollies and cones by May 2025.
Unfortunately, the situation is far from improving. The Philippines' policies in favor of biofuels lead to an increase in coconut oil use in diesel blending, further depleting its availability for food use. Plus, global production cuts project a 5-10% drop in coconut oil production this season, leaving low output likely to continue into 2026. The beauty and wellness sectors' growing demand, as well as the increased substitution of cocoa butter with coconut oil due to surging cocoa prices, only compound the issue.
Expanding supplies isn't an easy fix—coconut trees take over a year to mature, and expansion is limited by environmental regulations and deforestation concerns. To make matters worse, La Niña is expected to bring floods, disrupting production further.
With demand outpacing supply, it's clear that coconut oil prices will stick around their astronomical levels, keeping ice cream and related products pricy through 2025 and beyond.
Enrichment Insights:- In 2025, severe production declines were prevalent in major coconut-producing countries such as the Philippines, Indonesia, and Sri Lanka, primarily due to El Niño-induced droughts and reduced yields.- Inventories in these regions are depleted, further tightening the market.- Biofuel policies, rising global mandates for renewable fuels, and growing demand for coconut oil in health products, cosmetics, and as a dairy alternative are all contributing to the tightness of the overall vegetable oil market.- The global coconut products market is projected to grow at a CAGR of 9.2% from 2025 to 2032, reaching $16.2 billion by 2032.- Coconut oil faces unique supply challenges compared to other vegetable oils, leading to sustained upward price trends despite improving global grain and oilseed supplies.
- The rising cost of coconut oil, an essential ingredient in ice cream and many other products, is not limited to the dessert industry. The high price is also impacting the production costs of industrial ice cream due to its high melting point and neutral flavor.
- The beauty and wellness sectors, as well as the increased substitution of cocoa butter with coconut oil due to surging cocoa prices, are further contributing to the tightness of the coconut oil market.
- Expansion of coconut oil supply is challenging due to the long maturation period of coconut trees, environmental regulations, deforestation concerns, and projected disruptions from La Niña, ensuring that the price of coconut oil will remain high, impacting consumers' wallets well into 2026 and beyond.
