HONG KONG—Coconut oil prices have dropped by more than half over the past year as the commodity, which is high in saturated fat, has fallen out of favor in kitchens and factories.
The health benefits of coconut oil have been challenged by the American Heart Association and other organizations in recent years and that has hurt demand. In addition, falling prices of crude and other alternative vegetable oils have made industrial coconut oil less cost effective as an ingredient in health and beauty products and biodiesel.
The wholesale price of industrial coconut oil averaged $786.72 a metric ton in November, down 58% from its peak of $1,869.76 in June 2017, according to data from the World Bank. Industrial coconut oil, which comes from coconut flesh, is often extracted with chemicals and used in commercial food production, biodiesel and personal care products.
In addition, imports of coconut oil into the U.S. from Southeast Asia and other regions dropped 4% in the 12 months through Sept. 30, according to data from the U.S. Department of Agriculture.
Consumption of virgin coconut oil—a pure form of the commodity that is extracted without heat or chemicals—increased from around 2012 as it grew in popularity as a health food and that pushed prices higher. People used it in beverages like smoothies and bulletproof coffees—where a tablespoon of oil is added to hot coffee—and consumed it in ice cream, on toast and in baked goods.
After a powerful typhoon decimated scores of coconut trees in the Philippines—one of the world’s biggest producers of the crop—more plantations sprung up in the country and elsewhere as farmers tried to take advantage of greater demand.
But in June 2017, the American Heart Association raised fresh questions about coconut oil’s benefits. It said the oil is 82% saturated fat, a higher level than what is found in butter and beef fat. The association also said coconut oil’s saturated fat raises low-density lipoproteins—also known as bad cholesterol—in people consuming it. It recommended that saturated fat should make up less that 10% of a person’s average daily calories.
At present, coconut oil makes up just 2% of all the vegetable oil consumed around the world. Demand has peaked, said Dorab Mistry, a vegetable oil analyst and director at Godrej International, adding that the market for exotic oils “tends to move with whatever has captured the imagination of discerning consumers.” He said avocado oil is now favored by people for its purported health benefits.
Uron Salum, executive director of the International Coconut Community, an intergovernmental organization of coconut-growing countries, said negative publicity about the health benefits of coconut oil has hurt demand. The group, he added, is working to change consumer opinions by touting health benefits like coconut oil’s role in boosting levels of good cholesterol.
Lower coconut oil prices, meanwhile, have been a boon for some companies. However, analysts say that with price declines in substitute vegetable oils there has been a shift by larger companies into other oils for use as a feedstock or in biodiesel.
Two years ago, Luke Geddie and his mother, Joy Reese, launched Skinny & Co., a company that uses coconut oil to make products like shampoo and soap. It also sells jars of raw coconut oil for cooking and its website says the oil “increases metabolism,” “improves brain clarity” and “supports hormonal balance.”
“Global demand has taken a hit,” Mr. Geddie said. He added that the fall in coconut oil prices allowed him to reduce prices by “a bit.” A Skinny & Co. shampoo bar retails for $16.95, several times the price of a bottle of Pantene shampoo in American drugstores. Mr. Geddie said he expects demand for coconut oil to grow as movements like the paleo diet—which is based on foods that have existed since the Paleolithic era more than 10,000 years ago—become more popular.
Americans used 437,000 metric tons of coconut oil in the year ended Sept. 30, compared with 562,000 metric tons in the year that ended in September 2015, according to USDA data. Industrial consumption, which accounted for two-thirds of the total and includes things like cleaning and household products made from coconut oil, didn’t change much over the same period, so the drop was largely due to lower individual consumption.
Brigitte Hermanns used to be a fan of virgin coconut oil, using it as an eye makeup remover and a body moisturizer. She even used it on her hair.
But then she “started to break out everywhere,” said Ms. Hermanns, who lives in Toronto and has blogged about her decision to stop using coconut oil. “It was kind of controversial,” she said, adding she is sticking to olive oil in her diet because it is comprised of “healthy fats.”
Write to Lucy Craymer at [email protected]