As the End of 2021 Nears, the Story Continues: Logistics and Freight Overwhelmingly Challenge the Supply Chains

Surge in demand on coconut ingredients for year end and baking season needs pair with existing logistics and freight costs to inflate pricing once again.

Desiccated Coconut

The first 3 quarters of 2021 saw a rise in costs and delivery times for most of the desiccated coconut products as suppliers scramble to fill their existing contracts and spot purchase needs.  While Filipino and Sri Lankan suppliers finally show signs of normalization, freight cost and limited shipping space continue to be the biggest factor, keeping material costs high moving into 2022.

International freight rates have remained at extreme levels since June, as high as 250% increase YoY from certain origins.  November to December showed increases as high as 40% month to month. This has caused most suppliers to provide only FOB pricing at this time, with no guarantees of space on vessels or shipment dates.  West Coast ports continue to be the most problematic ports, with not only extreme rates, but also with 2–4-week delays standard on arrival due to congestion and limited trucking availability.

With seasonal demand increases, paired with many importers choosing to tread lightly on speculative inventory due to freight rates at year-highs, pricing continues to stay firmly around the $2/lb. mark on Organic Medium and Fine/Macaroon DC on stateside inventory. Many non-coconut focused importers are choosing to go ‘off the market’ on desiccated material at this time given the challenges.

What this means to you:

Buyers should focus on having enough inventory through February if possible. Expect pricing to stay at current extremes through this time due to the stable yet high demand, higher shipping costs and continued spot order inventory shortage. Compounding freight issues currently is Chinese New Year, which starts in February. In the two months leading up to the holiday, it is common to see GRI’s as importers try to ‘beat the rush’ of exports from China prior to the 3 week-long holiday.

Organic Coconut Sugar

Due to unpredictable and renewed flare-ups of COVID restrictions for Indonesian manufacturers, sugar supply continues to be tight yet stable; As with all imported ingredients from the Asian Pacific, freight costs and delays continue to be the overwhelming factor on pricing and timing of inventory. Indonesia is now taking its turn as the hardest hit origin for freight cost to USA, up 100% from July to December, if space can be found. Forecast is for continued rates at this level through January or February at the earliest.

Raw material for coconut sugar continues to provide a lag due to a less than optimal harvest paired with the pent-up demand on hold during the pandemic.  This has resulted in decreased availability of safety stock in the US.  The now extreme limitation of space on shipping containers further exacerbates the problem, causing continued tight supply for the foreseeable future.

Next on the horizon to further compound freight issues is Chinese New Year, which begins in February. In the two months leading up to February, it is common to see GRI’s as importers try to ‘beat the rush’ of outbound volume from China prior to the 3 week-long holiday.

As a reminder, the US Government’s failure to extend GSP (Generalized System of Preferences) in 2021 has compounded price increases due to supply chain troubles, resulting in a 5.1% tariff on all imported Coconut Sugar for the foreseeable future.

What this means to you:

Buyers can expect to pay higher prices as demand & shipping costs remain high through January 2022 at earliest.  In addition, extended lead times are to be expected, with freight averaging an additional 3-4 weeks to land at stateside warehouses.  We advise all buyers capable of pulling or contracting material through February to do so as there are limited expectations of any price relief, and catalysts for further shipping exacerbations. It is highly recommended to keep 3+ months of inventory on hand in case of any new COVID shutdowns at origin.

Coconut Flour

While demands on Organic Virgin Coconut Oil remain high, organic coconut flour supply is stable from most origins, albeit with extended lead times and premium pricing.  Suppliers are booking contracts through Q1 2022 at this time, at stable rates. As with all Asian-Pacific supply chains, longer lead times are to be expected with the continued international logistics issues. As a low-cost material, Coconut Flour also remains the hardest hit from freight and logistics increases.

The US Government’s failure to extend GSP (Generalized System of Preferences) has also hit all origins on this material, resulting in a steep 9.6% tariff on all imported Coconut Flour.

What this means to you:

Although pricing is stable, the un-extended GSP along with extreme freight rates have resulted in sharply increased pricing on the low-cost Coconut Flour which will remain for the foreseeable future and at least through February. We encourage able buyers to contract this material through fall, especially at larger volumes. The Coconut Cooperative is offering discounts on this material at 10+ pallet contracts through considerations from its supplier-partners to combat the extreme logistics costs.

Coconut Oil

Like flour, both Organic RBD and Organic Virgin Coconut Oil production is becoming increasingly stable, but at a considerable premium.  With the legislative bans of Palm Oils at some origins, local markets have resorted to RBD material to replace a standard industrial ingredient, resulting in a significant demand squeeze on Organic RBD Coconut Oil pricing over the last 6 months. As expected, spot order buyers are faced with a shortage of Organic RBD in US-based inventory.

Although raw material and production costs have recently shown signs of reprieve on OVCO, freight continues to be a big issue, counteracting any origin price relief.

What this means to you:

Although Coconut Oil remains on the stable side of the Coconut Ingredient portfolio, material remains at a considerable premium, especially RBD material. Freight costs and delays continue to force buyers to have no choice but to pay premiums for material, which furthers the market’s bubble. We are recommending that all buyers capable to have inventory levels to last through February.

Coconut Milk Powder | Coconut Cream Powder | Coconut Water Powder

The Vietnamese origin Coconut Milk and Water Powder supply remain on the stable side of the portfolio, however as with all other portfolio materials, freight woes weight heavily on pricing, keeping costs stable yet high.

Second to Indonesia, Vietnam has been hit hard with freight cost increases, with a 70% increase July to December. Like Indonesia, Vietnam is also facing new COVID flare-ups and causing manufacturing restrictions and shutdowns, which means there is potential for limited stock on these materials over the next 3-4 months. Manufacturing price increases of about 5% on the material due to raw material and production costs are in effect starting in January 2022.

What this means to you:

Coconut Milk/Cream/Water Powder continues to be on the more stable side of the coconut portfolio, albeit at a premium. With the potential for extended shutdowns via the COVID Delta variant, we are advising all buyers to contract, or order needed material through the rest of the year if possible.

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