Ice cream lovers may soon face higher prices, following a series of recent spikes in other beloved commodities like olive oil, coffee, and chocolate. While ice cream itself isn’t a traded commodity, one of its key ingredients—coconut oil—has seen record wholesale prices throughout 2025, pushing the cost of industrially produced gelatos upward.
Coconut oil prices have surged due to a combination of factors including supply shortages, increasing demand, and broader market dynamics. This tropical oil, extracted from the dried or fresh meat of coconuts, plays a crucial role in ice cream production. Last week, benchmark wholesale prices for Filipino coconut oil, a global industry standard traded in Rotterdam, surpassed $2,700 per metric ton—nearly double last year’s price and about 200% above the 2000-2020 average. The previous peak was $2,300 in 2011.
Why Coconut Oil Matters for Ice Cream
Coconut oil’s high melting point makes it indispensable for keeping gelato solid at room temperature without compromising texture or flavor—especially important for hard-coated ice creams like Unilever’s popular Magnum bars. It’s also vital for dairy-free and vegan ice creams, an increasingly popular segment in the $80 billion global ice cream market.
The Supply Crunch: Weather and Production
The supply shortage stems largely from unfavorable weather linked to the El Niño cycle, which disrupted rainfall patterns across Southeast Asia from mid-2023 to mid-2024. Instead of the usual cool, wet conditions, the region experienced hot and dry weather, stressing coconut palms and reducing yields. Since coconut trees take about a year to produce fruit, this weather pattern is now resulting in significantly lower harvests.
The Philippines, the world’s largest coconut oil producer with 45% of global output, along with Indonesia (28%) and India (13%), are at the center of this supply squeeze. Total global production is forecast to drop nearly 10% to 3.6 million metric tons for the 2024-25 season, with low output expected to continue through 2025-26.
Despite its significance for certain industries, coconut oil accounts for less than 2% of global edible oil consumption—roughly equal to olive oil. Palm and soybean oils dominate the market, collectively comprising 65%, while sunflower and rapeseed oils make up another 24%.
Policy Shifts and Rising Demand
The price surge wasn’t driven by supply issues alone. Government biofuel policies have amplified demand, particularly in the Philippines, which mandates blending diesel with coco methyl ester, a derivative of coconut oil. The blending target has increased steadily—from 1% in 2007 to an expected 5% by the end of 2026. Each 1% increase redirects roughly 900 million coconuts from food to fuel production.
If these targets are met, the Philippines will use about 4.5 billion coconuts annually for biodiesel—nearly a third of its 15 billion annual harvest. Papua New Guinea is pursuing similar biofuel initiatives, illustrating how energy policies in Asia impact food prices worldwide. The result: higher prices for vegan ice cream in Europe and the U.S., driven by demand for cheap fuel in Asia.
Additional Demand Pressures: Chocolate and Beauty Trends
Two other demand factors intensified the coconut oil shortage in 2024. First, soaring cocoa prices led confectionery manufacturers to partially substitute expensive cocoa with relatively cheaper coconut oil in chocolate products. Across millions of items, this substitution has tightened coconut oil supply further.
Second, social media influencers have boosted demand for coconut oil in personal care and beauty products. Promoted as a healthy and environmentally friendly alternative to palm oil, coconut oil is increasingly used in soaps and cosmetics, adding another layer of industrial demand.
Outlook: Supply Recovery and Ongoing Challenges
While weather conditions have normalized in the Philippines, suggesting a supply rebound in 2026, longer-term solutions face hurdles. Expanding coconut cultivation is limited by deforestation policies, especially in Indonesia, and new trees require years to mature before producing fruit.
Meanwhile, competition between food uses and biofuel production is expected to intensify, keeping upward pressure on prices. For ice cream enthusiasts, this means that while 2025 might bring sticker shock, there is hope for more affordable treats by 2026—assuming biofuel demand doesn’t continue to climb.
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