Logistics and Freight Continue to Challenge the Supply Chains,
but Hope for Reprieve Begins to Show
As Chinese New Year begins, freight and logistics return to peak pricing from some origins, but some relaxation begins to come into focus.
Desiccated Coconut
While Filipino and Sri Lankan suppliers finally show signs of normalization on raw material and production costs, freight cost and limited shipping space continue to be the biggest factor, keeping material costs in the high range through Q1.
International freight rates have remained at extreme levels since June, as high as 250% increase year-over-year from certain origins. November to December showed increases as high as 40%, and January proved to be as high if not higher. 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. Slowly but surely, bottlenecks have become more problematic on the domestic US side of logistics.
With Chinese New Year now active, there is some expectation for relaxation of international freight costs by March. However, seasonal demand increases, along with many importers treading lightly on speculative inventory due to high freight rates, is keeping prices firmly around the $2/lb. mark on Organic Medium and Fine/Macaroon DC on stateside inventory. Many non-coconut-focused importers continue to stay ‘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 March if possible when some reprieve is expected post-Chinese New Year outbounds. 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.
Organic Coconut Sugar
Due to unpredictable and renewed flare-ups of COVID restrictions for Indonesian manufacturers, paired with a less than optimal harvest, 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 the USA, up over 100% from July to February, if space can be found. The forecast is for continued rates at this level through February at the earliest, with hope of light reprieve in March.
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 surplus spot order 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. To make matters worse, slowly but surely, the logistics problems have also become a domestic issue now as strong as international, with limited truckers, chassis, and drayage availability.
With Chinese New Year now active, there is some expectation for relaxation of international freight costs by March, however active rates remain at year-highs.
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 March at the 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 March to do so as there are limited expectations of any price relief until April. It is highly recommended to keep a minimum of 3 months’ inventory on hand in case of any new COVID shutdowns or limitations at the 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, compounded now by local freight shortages. Coconut Flour remains the hardest hit from freight and logistics increases as a low-cost material.
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 (at least through February). We encourage buyers to contract this material through March, 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, albeit at a premium. With the recent 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, resulting in higher prices.
Although raw material and production costs have recently shown signs of reprieve on OVCO, freight rates continue to be problematic, counteracting most of origin price relief. The start of 2022 has brought a compounding of the freight + logistics troubles with further bottlenecks on the domestic US side of the equation.
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 recommend that buyers have inventory levels that will last through February. TCC is currently offering discounts on OVCO orders of over 10 totes, 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, however, as with all other portfolio materials, freight woes weigh heavily on pricing, keeping costs stable yet high.
Second to Indonesia, and as expected due to the ‘Chinese New Year rush,’ Vietnam has been hit hard with freight cost increases, with a nearly 100% increase from July to January. Like Indonesia, parts of Vietnam continue to face COVID flare-ups, causing manufacturing restrictions, and the potential for limited stock on these materials over the next 3-4 months. Expected manufacturing price increases of about 5% on all Coconut Milk/Cream/Water powder material due to raw material and production costs are now in effect for the foreseeable future.
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 March if possible.
Thanks for reading! If you have questions about this market update, please reach out! You can contact us here
