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

​Demand surge on coconut ingredients for the end of year and baking season needs, along with existing logistics and freight costs, inflate pricing once again. 

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 high moving into 2022.

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% month over month, and January is proving 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 extreme rates and 2–4-week delays standard on arrival due to congestion and limited trucking availability. Slowly but surely, the international freight and logistics problems have also become a domestic issue.

Many importers are choosing to tread lightly on speculative inventory due to freight rates at year-highs.  This, coupled with seasonal demand increases has caused pricing to stay firmly around the $2/lb. mark on Organic Medium and Fine/Macaroon DC 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 when some reprieve is expected post-Chinese New Year. 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, 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 biggest factor on the pricing and timing of inventory. Indonesia is now taking its turn as the hardest hit origin for freight costs to the USA, up over 100% from July to January, if space can be found. The forecast is for continued rates at this level through January or February at the earliest.

A less than optimal harvest coupled with the pent-up demand on hold during the pandemic has caused a lag on raw material for coconut sugar.  This has resulted in decreased availability of safety stock in the US.  Major limitations of space on shipping containers further exacerbate the problem, causing continued tight supply for the foreseeable future. To make matters worse, logistics issues are no longer limited to an international problem.  With limited truckers, chassis, and drayage availability, the US is now seeing its fair share of complications.

Further compounding freight issues is the Chinese New Year, which begins in February. Until mid-February, it is common to see GRI’s as importers try to ‘beat the rush’ of outbound volume from China before 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 February 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 February to do so as there are limited expectations of any price relief, and catalysts for further shipping exacerbations remain. It is highly recommended to keep a minimum of 3 months’ inventory on hand in case of any new COVID shutdowns 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, which are now compounded 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 rising freight rates have resulted in sharply increased pricing on the low-cost coconut flour.  These higher prices will likely remain for the foreseeable future (at least through February).  We encourage all buyers who can contract this material through February to do so, 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, resulting in higher prices.

Although raw material and production costs have recently shown signs of reprieve on OVCO, freight continues to be a significant factor, counteracting any origin price relief. As 2022 begins, the logistics troubles are compounded by local freight shortages.

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 all buyers maintain inventory levels that will 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.  As with all other portfolio materials, though, freight woes weigh heavily on pricing.  Costs continue to be high, yet stable.

Second to Indonesia, Vietnam has been hit hard with freight cost increases, with a nearly 100% increase from July to January. Like Indonesia, Vietnam is also facing new COVID flare-ups, causing manufacturing restrictions and shutdowns.  There is a strong 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 due to the COVID Delta and Omicron variants, we are advising all buyers to contract, or order needed material through March if possible.

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