Description

India’s retail food inflation eased to -1.06% in June 2025, marking the lowest rate since 2019. Yet, several essential commodities particularly vegetable oils remain expensive. Among them, coconut oil has seen a sharp price surge, driven by global supply shortages and adverse climate conditions. Here’s a closer look at the reasons, market dynamics, and future outlook of this price spike.

Current Price Trends in Edible Oils

India’s edible oil market shows mixed inflation patterns.

• Palm oil prices have risen to Rupees 132/kg, up from Rupees 95 a year ago.

• Soybean, sunflower, and mustard oils have also experienced steep increases.

• Coconut oil has nearly doubled in price since January 2025, reaching Rupees 460/kg at retail outlets in Kerala overtaking even sesame oil, which has traditionally been the premium choice.

Global Supply Constraints And Climate Challenges

The primary driver of the coconut oil price hike is lower production in the Philippines and Indonesia, the two leading exporters. The El Niño-induced drought from July 2023 to June 2024 disrupted coconut flowering and fruiting. Since coconuts need around a year to mature, the effects are only now being fully felt. Compounding the issue, aging plantations in these countries have further limited yields.

Domestic Production And Market Composition

India’s coconut oil output has been stagnant or slightly declining. Of the 5.7 lakh tonnes produced annually, only 3.9 lakh tonnes are consumed as food oil; the remainder is diverted for cosmetics and industrial purposes. Imported oils dominate India’s edible oil market, with palm, soybean, and sunflower oils making up 72% of total consumption.

Regional Consumption Patterns

Kerala, once India’s leading coconut producer, now trails Tamil Nadu and Karnataka. Even in Kerala, coconut oil consumption averages just 2 litres per person annually, far less than palm oil at around 4 litres. The continued rise in coconut oil prices may drive even more consumers toward cheaper imported oils.

Policy And Market Developments

• Indonesia is considering restrictions on raw coconut exports to secure domestic supply.

• The Philippines has increased the use of coconut oil-based biodiesel, further reducing exports.

• A rapid increase in supply seems unlikely, as new coconut plantations take 3–5 years to begin producing fruit.
  Amid these uncertainties, buyers are stockpiling to hedge against further price jumps.

Future Outlook

The soaring cost of coconut oil underscores global climate pressures and supply-chain vulnerabilities. While coconut oil represents only a small share of India’s edible oil basket, sustained high prices may accelerate the shift to cheaper alternatives like palm or soybean oil. Any meaningful supply recovery will take several years, given the long gestation period of coconut trees.

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