While demand remains level for organic coconut ingredients, signs of raw material and logisitics reprieve finally line up.

Continued high logistics costs and freight difficulties have been the story of 2022, with Indonesia, Vietnam, and the Philippines continuing to be the hardest hit origins. As we enter into the second half of 2022, signs of lower freight costs, paired with more competitive raw material costs on the back of a stronger US Dollar cause reason to believe buyers may see better rates in Q3.

Desiccated Coconut

While Filipino and Sri Lankan suppliers finally show signs of normalization on raw material and production costs, freight costs finally show signs of retracting, resulting in better-landed rates on lower-cost desiccated material.

International freight rates have remained at extreme levels since June, but signs of plateauing and reversal have shown. Most suppliers will provide only FOB pricing at this time, still with some difficulty of space on vessels or confirmed outbound shipment dates.  While rates appear to normalize, logistics bottlenecks have now become equally if not greater of a problem on arrival and locally in the USA.  USWC Ports show the largest risk of delays on arrival of 2-3 weeks.

The expectation for relaxation of international freight costs in the 2nd half of the year is becoming stronger, and buyers are slowly beginning to step in and contract with the lower rates.

What this means to you:

With the quickly relaxing rates, it is strongly recommended that buyers become more aggressive and try to lock in rates for at least all of Q3. TCC is offering discounted contracts on desiccated coconut through July. 

Organic Coconut Sugar

Sugar supply continues to be tight yet stable; Although freight has started to relax from all South and East Asian origins, Indonesia continues to be the most impacted origin on freight to the USA.  The forecast is for lower rates in July and August, compared to the extreme rates of late.   

Raw material for coconut sugar continues to cause slightly longer lead times due to a less than optimal harvest. As with all US imports, slowly but surely, the logistics problems have also become a domestic US issue, even more so than international.  Limited truckers, chassis, and drayage availability on arrival continue to cause delays. Please expect longer lead times and limited stock on the West Coast, which is the most congested of all arrival ports.  

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:

Pricing on sugar has seen a reprieve moving into the 2nd half of 2022, and buyers have slowly stepped up to lock in reduced pricing.  It is recommended that all buyers move to contract at the lower rates in case of any quick swing in freight. 

Coconut Flour

Organic coconut flour supply is stable from most origins, with product readily available for shipment.  Suppliers are booking contracts through Q3 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. As a low-cost material, coconut flour also remains the hardest hit from freight and logistics increases, despite freight costs having plateaued and coming back to manageable levels.

For the first time in a couple of years, coconut flour has increased in demand in the market, further limiting stateside stock for larger spot orders.

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 increased pricing on the low-cost organic coconut flour which will remain for the foreseeable future and at least through Q2. We encourage buyers to contract this material through August if possible, especially at larger volumes. Through July, 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, organic virgin coconut oil production is becoming increasingly stable.  However, with recent legislative bans of palm oils at some origins, local markets have resorted to RBD material to replace a standard industrial ingredient.  This has resulted in a significant demand squeeze on organic RBD coconut oil pricing over the last 12 months. As expected, spot order buyers are faced with a shortage of organic RBD in US-based inventory, resulting in significantly higher prices compared to the last 3-4 years.

With raw material costs leveling out, paired with better freight rates, pricing on the OVCO should see a reprieve in Q3, although there is still some risk of a quick swing in freight rates.

What this means to you:

Although coconut oil remains on the stable side of the coconut ingredient portfolio, the material remains at a considerable premium to pre-COVID rates, 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 that last through August. In order to combat freight costs, TCC is currently offering discounts on OVCO orders of over 10 totes through July, 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, pricing still remains on the higher side since the start of the pandemic.  

Second to Indonesia, Vietnam has been hit hard with freight cost increases in the last 12 months, with a nearly 100% increase from July to June. With a reprieve in freight costs showing, there is reason to believe some relaxation on costs should appear in Q3.

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. As the best-selling ingredients in TCC’s portfolio, we recommend that clients contract or order needed material through August if possible due to increasing demand.

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