In exactly one year, we have witnessed a dramatic rise in the prices of coconut oil, coconuts, copra, and coconut oil cake—from their lowest to highest (so far). The growth has been staggering—three times! Naturally, this has everyone talking. I’d like to reflect on its impact across various stakeholders, based on what we now know in hindsight. Very few in this industry, including us, were prepared for a shift of this scale, one that now appears irreversible. Until recently, inflation impacted almost every commodity—except coconut.

Farmers

Rising prices should normally bring cheer to farmers. But this time, it hasn’t quite had that effect. The increase was not driven by demand, but rather by a shortage in supply. If a farmer harvested 100 nuts last year, this year he may have harvested only 50. So, despite the price tripling, his income may have increased by only 50%. Additionally, the cost of farm inputs—labour, fertilizers, water—has also risen sharply.

Traditionally, farmers have preferred cultivating cash crops like arecanut and rubber over coconuts. Coconut is often grown just for personal consumption or for plant diversity. The earlier market price for coconuts made commercial cultivation unattractive. However, this price rise may reignite farmers’ interest in coconuts, which could significantly benefit the entire industry.

Usage

Coconut oil is widely used in cooking, baking, soaps, hair oil, body massage, and more. In some of these applications, there are no effective substitutes, making demand relatively inelastic. That’s partly why the price continues to rise unabated.

Earlier, most coconuts were used to make copra, and hence, coconut oil. The prices of coconuts and copra were closely tied to the price of coconut oil and palm oil. Now, things are changing. Millers are finding that coconuts aren't reaching them as copra. Instead, they’re harvested while still tender, which actually improves tree yield. Mature (often semi-mature) coconuts are increasingly used to make desiccated coconut. The high-quality remainder becomes edible copra (which commands a premium). Only the rest makes it to oil mills for extraction.

Coconut Processors

This has been a profitable period for coconut traders and processors. They buy raw materials, and by the time they process and sell the finished product, the price has risen. The more stock one can hold and the faster one completes the production cycle, the higher the profit.

Previously, price surges brought caution—what if prices dropped tomorrow? Now, the trend is far more predictable. However, this isn’t without challenges. Working capital requirements have risen sharply. For those with limited capital, their ability to stock and maintain quality production has taken a hit. Sufficient inventory is needed for steady production (e.g., drying copra, sedimentation-based oil filtration) and for backup in case of disruptions.

One vendor told me about his clients in the coconut oil industry. Companies that were once prompt payers have now started delaying payments due to financial strain.

Adulteration

The extent of adulteration tends to increase with the price gap between pure coconut oil and its cheaper substitutes. Palm kernel oil is a common adulterant because of its similarity in chemical composition. Unfortunately, adulteration often comes bundled with other malpractices like underweight packaging and black-market sales.

Consumers

Consumers have taken the hardest hit. They’re forced to pay much more while often ending up with adulterated products. To stay within budget, many turn to alternatives like palmolein or sunflower oil. The worst-case scenario is when a consumer switches oils permanently—even if coconut oil prices eventually drop again.

Coconut Oil vs. Other Edible Oils

Coconut oil now joins the ranks of premium local cooking oils like ghee, gingelly oil, and groundnut oil—where it rightfully belongs. It should be chosen for its quality, not its affordability. Each of these premium oils has a cheaper substitute: vanaspati for ghee, rice bran oil for gingelly oil, and palm kernel oil for coconut oil. Mass-market oils like palmolein, sunflower, soybean, cottonseed, and rice bran will continue to cater to the broader population.