In Indonesia, the world’s largest producer of coconuts, a bitter tug-of-war has emerged over the humble commodity, pitting farmers against processors in a battle over supply, prices, and policy. As global demand for coconut products surges, local prices have skyrocketed, contributing to inflation and threatening the livelihoods of thousands in the processing industry. Now, calls for a temporary export moratorium have sparked fierce debate, with farmers seizing a rare opportunity for profit while industry leaders warn of mass layoffs and economic ripple effects.
Rising Prices, Rising Tensions
The coconut, often an overlooked staple, has become an unexpected driver of inflation in Indonesia. Official data from Statistics Indonesia (BPS) reveals that the commodity added 0.02 percentage points to annual inflation in March, doubling to 0.04 points in April. In East Java, prices spiked by nearly 25 percent month-on-month in April, reaching Rp 15,303 (US$0.93) per kilogram—a staggering 57 percent increase from the previous year. This sharp rise reflects a perfect storm of global demand and local supply constraints, leaving policymakers scrambling for solutions. 
At the heart of the crisis is a booming international market for coconut derivatives, from plant-based milk alternatives to virgin coconut oil and coconut water. Exports of endocarp coconuts soared by 50.8 percent in 2023, generating US$113.6 million, with China as the primary buyer. The momentum has only intensified in 2025, with export values in the first two months tripling compared to the same period last year. Meanwhile, international coconut oil prices hit a record high of US$2,483 per tonne in April, more than double the price at the start of the previous year, according to World Bank data.
Eliza Mardian, a researcher at the Center of Reform on Economics (CORE), attributes the price surge to a global shift toward plant-based products driven by health-conscious consumers. “The demand for coconut milk and other derivatives has grown exponentially” she told a local outlet. Yet, this boom has exposed deep structural issues in Indonesia’s coconut sector, where smallholder farmers—comprising the majority of producers—struggle with limited access to fertilizers, modern technology, and capital.
Supply Crunch and Industry Struggles
While farmers celebrate higher returns, the coconut processing industry is sounding the alarm over a severe supply crunch. The Indonesian Coconut Processing Industry Association (HIPKI) has urged the government to impose a six-to-twelve-month moratorium on raw coconut exports to stabilize local prices, which have tripled in some regions since mid-2024. HIPKI chairman Rudy Handiwidjaja warned that premature harvesting to meet export demand is disrupting future crop cycles, exacerbating shortages. “Many coconuts are being harvested before they’re ready, which impacts long-term yields” he said in a recent statement.
The fallout is already visible. In Riau, two processing firms have laid off a combined 3,500 workers as they grapple with dwindling raw material supplies. Beyond job losses, the price spike is rippling through industries reliant on coconut products, from restaurants using coconut cream to briquette manufacturers processing coconut shells for charcoal. With domestic demand from households and small-to-medium enterprises estimated at 2 billion coconut pieces annually, the Industry Ministry acknowledges that the absence of export disincentives has tilted the market in favor of foreign buyers, often at the expense of local processors.
Industry Minister Agus Gumiwang Kartasasmita highlighted the uneven playing field in a recent statement: “Exporters currently pay no taxes, while domestic processors face income tax when purchasing coconuts from farmers. This disadvantages our local industry.” Despite Indonesia’s dominance in global coconut production—output reached 17.97 million tonnes in 2023, according to the Food and Agriculture Organization (FAO)—the country lacks robust trade policies like export bans or levies to balance domestic and international needs.
Farmers Push Back
For Indonesia’s 6 million coconut-farming families, the price surge offers a long-overdue lifeline after decades of slim margins. The Indonesian Coconut Farmers Organization (Perpekindo) argues that an export moratorium risks derailing this progress, as farmers finally have the means to invest in replanting and upgrading their plantations. Instead of a blanket ban, Perpekindo proposes targeted restrictions paired with a guaranteed minimum purchase price of Rp 5,000 per kilogram and commitments from processors to absorb harvests.
Muhaemin, chairman of Perpekindo, criticized the industry’s historical treatment of farmers: “Until now, they’ve paid us low prices while selling processed products at high margins. If they’re short on raw materials, why not build real partnerships with farmers?” His remarks reflect a deep frustration among smallholders, many of whom operate at just 33 percent of their potential capacity due to supply constraints worsened by the El Niño weather phenomenon and chronic underinvestment.
The divide between farmers and processors underscores a broader challenge: how to equitably distribute the benefits of a global commodity boom. While farmers see export markets as a path to financial stability, the local industry warns that without intervention, up to 21,000 jobs in coconut processing could be at risk. The stakes are high, as Indonesia navigates its dual role as the world’s largest exporter of coconut products and a key supplier to its own domestic market.
Policy Dilemma and Economic Impacts
The Industry Ministry has pledged to intensify dialogue with both farmers’ associations and industry players to address the supply-demand imbalance, emphasizing a commitment to farmer welfare. However, experts caution that a lack of reliable regional data on coconut supply and demand hampers effective policymaking. Some argue that short-term export disincentives, such as a moratorium, may be necessary to stabilize the market, even if they risk alienating farmers and disrupting international trade relationships with key buyers like China, Malaysia, and Thailand.
Beyond immediate policy fixes, the coconut crisis highlights deeper structural issues in Indonesia’s agricultural sector. Smallholder farmers, who dominate coconut production, often lack access to modern tools and inputs, leaving them vulnerable to weather shocks and market fluctuations. At the same time, the processing industry’s reliance on consistent local supply clashes with the allure of lucrative export markets—a tension that policymakers must resolve to prevent further economic fallout.
The coconut price surge is also a microcosm of broader inflationary pressures facing Indonesia. As everyday goods like coconut cream become more expensive, households and small businesses feel the pinch, particularly in rural areas where coconut products are dietary staples. If left unchecked, these trends could amplify cost-of-living concerns, adding political weight to an already contentious issue.
Looking Ahead
As Indonesia grapples with its coconut conundrum, the path forward remains uncertain. A temporary export moratorium could provide breathing room for local processors, but at the risk of undermining farmers’ hard-won gains. Conversely, unchecked exports may bolster rural economies in the short term while jeopardizing thousands of industrial jobs and fueling inflation. With dialogue ongoing, the government faces the delicate task of forging a compromise that prioritizes both farmer welfare and industrial stability.
For now, the coconut—a symbol of tropical abundance—has become a flashpoint for Indonesia’s economic challenges. How the nation resolves this crisis may set a precedent for managing other commodity booms, as global demand for sustainable, plant-based products continues to reshape markets. Amid the debate, one question looms large: can Indonesia turn this crisis into an opportunity for lasting reform?
