Major international freight relief leading to increases in South/Southeast Asian coconut demand.

After over 2 years of difficult and excessive costs on international freight, the end of 2022 finally brings sharp relief on logistics costs for imports from South/Southeast Asia. With the fast drop in freight costs, an increase in buying demand to “cycle” higher cost basis inventory begins to show for the North American Market.

Desiccated Coconut

As Filipino and Sri Lankan suppliers finally show signs of normalization on raw material and production costs, international freight has dropped 50-70%, pulling landed costs down fast.

In attempts to cycle inventory, many larger importers with problematic cost-basis inventory have flooded the market with short-coded and discounted materials, posing an opportunity for some, and confusion for many on understanding “fair pricing.”

While landed costs appear to quickly normalize, logistics bottlenecks continue to be problematic on arrival and locally in the USA. USWC Ports show the largest risk of delays on arrival, with 2 weeks being standard. The pending rail issue will have serious effects on domestic logistics in the event of escalation.

The recent relaxation of international freight costs has spurred buyers to step in and contract with the lower rates, balancing out the demand/supply and stabilizing pricing.

What this means to you:

With the relaxed international logistics costs, buyers can become more aggressive and try to lock in rates for at least Q1 of 2023. TCC is offering discounted contracts on desiccated coconut through March.

Organic Coconut Sugar

Sugar supply continues to be stable, with freight falling but demand level-to-small-uptick; Forecast is for the best international freight rates in 2 years in December and into 2023, closer to pre-COVID levels.

Raw material for coconut sugar continues to have slightly longer lead times due to a less-than-optimal harvest, with demand stable and buyers stepping in to take advantage of logistics costs. As with all US imports, slowly but surely, the logistics problems have also become a domestic issue, now with a pending significant rail problem rearing its head. Please expect delays and limited stock on the West Coast, the most congested of all arrival ports.

As a reminder, the US Government’s failure to extend GSP (Generalized System of Preferences) in 2021 remains active, resulting in a 5.1% tariff on all imported Coconut Sugar for the near future.

What this means to you:

Pricing on sugar has seen a definite reprieve moving in the late stages of 2022 and buyers have slowly stepped up to lock in reduced pricing. We recommend that all buyers move to contract at the lower rates in case of any quick swing in freight due to underlying international geo-economic riptides. TCC is offering discounted contracts on Sugar for the first half of 2023.

Coconut Flour

Organic coconut flour supply is stable from most origins, with product readily available for shipment. Suppliers are booking contracts through Q1 2023 at this time, at stable rates. Despite the relief, as a low-cost material, Coconut Flour also remains the hardest hit by freight and logistics increases.

Demand for Coconut Flour has increased of late, as buyers step in at the 15%+ lower landed cost/rates.

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 continues to burden the cost of Coconut Flour, with pricing still above COVID lows despite the freight relief. With pricing getting closer to pre-COVID levels, buyers are stepping up to cycle older and higher cost-basis inventory. Through December, The Coconut Cooperative is offering 10%+ discounts on this material at 10+ pallet contracts through considerations from its supplier partners to combat the extreme logistics costs.

Coconut Oil

Like flour, Organic Virgin Coconut Oil production is becoming increasingly stable. However, with recent legislative production restrictions 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, which finally is showing relief. While OVCO cost has fallen sharply over the last 2 months, Organic RBD continues to be a larger pricing challenge for larger buyers.

What this means to you:

Coconut Oil remains on the stable side of the Coconut Ingredient portfolio, with material nearly returning to pre-COVID levels on landed cost thanks to sharply decreasing freight costs. We are recommending that buyers contract or buy material at current costs through at least Q1 2023, with looming international challenges still present and the risk of freight swinging to the upside. To combat freight costs, TCC is currently offering discounts on OVCO orders or contracts of over ten totes through March, please inquire if interested.

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, with freight falling 50-70% since the start of November.

As Vietnam was one of the hardest hit origins during the pandemic concerning freight, the sharp decrease is showing fast relief on the landed cost of this material. Where possible, it is advised that clients follow the trend of ‘cycling inventory’ landed at a higher cost basis and restocking at current pricing, which may prove to be interim lows.

Demand has seen an uptick, especially for low-fat Coconut Milk Powder in the last 2 months, as buyers try to take advantage of the lower international logistics costs.

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 small premium to pre-COVID levels. As fastest selling ingredients in TCC’s portfolio, we recommend that clients contract or order inventory needed for a minimum of 3-6 months due to steadily increasing demand over the last 3 years, and adoption of the powders over traditional liquid materials.

Thanks for reading! If you have questions about this market update, please reach out! You can contact us here.