Logistics Costs Continue to Climb While Manufacturers Play Catch-up on High Demand

As coconut manufacturers and importers slowly start to catch up on high demand, logistics factors including continued increases in freight pricing, limited shipping space, and extreme port delays continue to be the overwhelming factor on pricing and availability. Below we have provided an update on our products.

Organic Desiccated Coconut

The first half of 2021 has seen 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.  As Filipino and Sri Lankan suppliers slowly show signs of catching up, freight cost and delays continue to be the overwhelming factor, keeping material costs high yet stable.

International freight rates continue to rise (now as much as 170% increase YoY from certain origins), causing many suppliers to provide only FOB pricing at this time with no guarantees of space on vessels or ship dates.  The West Coast ports continue to be the most problematic ports, with not only extreme rates, but also 2–3-week delays remaining standard on arrival.

On average, suppliers are still backed up about 2 months on production, with many only offering pricing for shipments 2-3 months in advance. Demand looks to stay high through 2021, with supply limited and pricing stable around 5-year highs. 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 be focused on ordering enough supply to last through at least the end of Q3 if possible. Expect pricing to stay at current extremes through summer due to the stable yet high demand, higher shipping costs and continued additional inventory shortage. Medium Grade DC will remain on shortest supply due to larger volume industrial demands. In order to supplement the supply challenges, The Coconut Cooperative has begun importing additional Medium and Fine Grade DC from alternate origins.

Organic Coconut Sugar

Sugar supply continues to be tight yet stable; however, as with all imported ingredients, freight costs and delays continue to be the big factor on pricing and timing of inventory. Raw material for coconut sugar continues to lag due to a less than optimal harvest paired with the pent-up demand on hold during the pandemic, resulting in minimal safety stock in the US.  In addition, manufacturers have recently warned of potential 2-3% price increases hitting by fall. The limited availability of space on shipping containers further exacerbates the problem, causing continued tight supply through the summer months. Freight costs accordingly continue to increase, up another 8-12% June to July via a steep GRI.

The US Government’s failure to extend GSP (Generalized System of Preferences) has compounded pricing increases due to supply, 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 2021. 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 material through fall demands to do so.  There is a significant threat that these effects will continue into early 2022, so buyers should keep this in mind when forecasting their upcoming needs as well.

Organic Coconut Flour

With demands on Organic Virgin Coconut Oil remaining high, Organic Coconut Flour supply is stable from most origins, albeit with extended lead times.  Many suppliers are booking contracts through Q4 at this time, at stable rates. As with all items, 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. 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.

Organic Coconut Oil

Like flour, both Organic RBD and Organic Virgin Coconut Oil production is becoming increasingly stable, but at a serious premium.  With the recent ban 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.

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 leave buyers with no choice but to pay premiums for material, which furthers the market’s bubble. We recommend, if possible, buyers’ contract through the summer months at minimum.

Thanks for reading!  If you have questions about the availability or pricing on any of our organic coconut products, please contact us at hello@thecoconutcoop.com.