Following an exceptionally tight market in 2025, the global coconut oil market is expected to move toward a more balanced supply-demand environment in 2026. Although the industry is unlikely to return to the production levels achieved in 2024, improving harvests in the Philippines and Indonesia are projected to support a meaningful recovery in global output. This increase in production is expected to enhance exportable supplies, facilitate a rebound in international trade, and gradually alleviate the supply constraints that drove coconut oil prices to multi-year highs during the previous year.

Global coconut oil production is forecast to reach 3.025 million metric tons in 2026, an increase of 10.8% from 2025 but still 13.5% below the 2024 level. The recovery is primarily underpinned by a rebound in the Philippines, where production is projected to increase by 20.4%, while Indonesia is expected to record a more modest 8.5% expansion. Production in other coconut-producing countries is also forecast to improve, reflecting more favorable weather conditions and improved crop performance. Nevertheless, structural challenges—including aging coconut palms, slow replanting efforts, and increasing competition for fresh coconuts from higher-value products such as virgin coconut oil, coconut milk, and desiccated coconut—will continue to constrain copra availability for oil extraction. Consequently, despite improving output, global supply is expected to remain below historical norms.

The improvement in production is expected to translate into higher export availability during 2026. Global coconut oil exports are forecast to increase by 6.4% to 2.678 million metric tons, led by larger shipments from the Philippines and Indonesia. However, export volumes are still projected to remain below the levels recorded in 2024, indicating that supply conditions will continue to be relatively tight. On the demand side, global imports are forecast to recover by 13.5% to 2.410 million metric tons, driven by sustained purchases from the European Union, a rebound in imports by the United States and Malaysia, and stronger buying interest from other importing countries as supply improves. The recovery in imports suggests that many buyers are replenishing inventories after a period of constrained availability rather than reflecting a substantial acceleration in underlying consumption.

Demand fundamentals remain broadly supportive despite the anticipated increase in supply. Coconut oil continues to benefit from stable consumption across the food processing, confectionery, bakery, oleochemical, cosmetics, and personal care industries, where its unique functional properties provide limited substitution opportunities. Nevertheless, purchasing decisions are expected to remain increasingly sensitive to relative price movements, particularly in comparison with palm kernel oil (PKO), the closest substitute in the lauric oil market. As export availability improves, importers are likely to adopt a more measured procurement strategy, balancing inventory replenishment against expectations of softer prices later in the year.

Price developments during the first four months of 2026 reflected the market's transition from the supply-driven rally of 2025 toward a more balanced trading environment. Coconut oil prices eased from the record highs reached in mid-2025 before stabilizing above historical averages, while PKO prices strengthened after early-year weakness, resulting in a significant narrowing of the price differential between the two competing lauric oils. The convergence in prices has improved the competitiveness of coconut oil while encouraging greater substitution between the two oils, particularly in oleochemical applications where feedstock flexibility is relatively high.

Looking ahead to the second half of 2026, the coconut oil market is expected to shift from one characterized by acute supply shortages to one of improving availability. Assuming favorable weather conditions and the absence of major climatic disruptions, coconut oil prices are projected to ease gradually to around USD 1,850–1,950 per metric ton by the end of the year as recovering production in major exporting countries increases market supplies. In contrast, palm kernel oil prices are expected to remain comparatively firmer at USD 1,950–2,050 per metric ton, supported by steady demand from the oleochemical sector and broader strength in the vegetable oils complex. As a result, the exceptional premium enjoyed by coconut oil during 2025 is expected to disappear, with PKO likely to regain its traditional premium over coconut oil. While downside risks to prices are increasing as supply recovers, market fundamentals are expected to remain generally supportive, and any adverse weather developments or production setbacks in major producing countries could quickly tighten supplies and alter the market outlook.