Organic coconut ingredient costs start to climb as we move into July, due to the combined effects of growing demand and certain supply concerns

As we ease into summer, the demand for organic coconut ingredients is showing signs of increases. Because of this and the seasonally high fall baking season, we suggest that clients consider contracting at least through September if possible. Pricing increases should be expected on the Coconut Portfolio under spot terms.

Desiccated Coconut

In the first half of 2023, Filipino and Sri Lankan suppliers finally saw signs of demand normalization for raw materials, as well as production costs. However, international freight rates out of South/Southeast Asian origins rose for the first time in several months. The interim lows on raw material costs from December/January have already bounced back 10%+ moving into the third quarter.

In attempts to cycle inventory, larger importers with problematic cost basis inventory have recently flooded the market with short-coded and discounted materials, providing an opportunity for some, and confusion for others struggling to understand fair market pricing.

In addition to the internal market variables, external international economic pressures continue to add stress to all international supply chains, including the Coconut Portfolio of South/Southeast Asia.

What this means to you:

We highly recommend that purchasers take a more proactive stance on inventory levels and keep a minimum of three months’ supply of inventory at this time, as prices for the low-cost desiccated coconut are expected to rise through the summer (at least).

Organic Coconut Sugar

The sugar supply continues to stabilize, with freight having found lows and demand increasing. However, the forecast is for increases on freight as well as production costs due to a less-than-optimal seasonal harvest. For the first time in years, signs of limited stock in the USA are causing buyers to hasten volume purchases and contracts for the summer and fall months.

Although coconut sugar production and costs stabilized in Q4 of 2022 and into 2023, demand steadily increased since February. In response to the recent pricing levels, buyers have jumped at the opportunity, creating a backlog and increased lead time for fresh shipments from origin. For the first time since 2021, we are seeing growth in demand again for coconut sugar. Increased lead times of 1-2 weeks or even 3-4 weeks for larger spot orders are possible.

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 significant reprieve since mid 2022, with pricing falling as much as 25% from the highs of COVID. In response, demand has picked up and stateside inventory has diminished rapidly amongst the larger importers. Still 5-15%+ off the average costs during COVID, we recommend that all buyers move to contract at current rates in case of any quick swing on freight due to underlying international geo-economic riptides, or any surge in demand as we saw in the years leading up to and the first year of COVID. Slightly longer lead times for larger spot orders should be expected. Low speculative stateside stock should also be expected at least through summer.

Coconut Flour

With demand for fresh Organic Virgin Coconut Oil production increasing back to pre-COVID levels and price rising, organic coconut flour supply is stable from most origins, with product readily available for shipment. Suppliers are booking contracts through Q4 2023 at this time, at stable rates. Due to the significant freight relief over the last 9 months, paired with increased demand for OVCO, Coconut Flour is finally reaching pre-COVID pricing levels, over 33% off the highs.

For the first time since 2021, TCC is seeing demand increasing on Organic Coconut Flour as costs have returned to manageable levels as a gluten-free alternative flour choice.

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 now close or back to pre-COVID levels and off around 35% from peak, sellers are stepping up to cycle older and higher cost basis inventory. Through Q4 2023, we are offering 10%+ discounts on this material at 10+ pallet contracts through considerations from our supplier-partners to combat the logistics costs.

Coconut Oil

Like flour, Organic Virgin Coconut Oil demand has increased and become increasingly stable, with July pricing up about 10-20% off the winter lows. While Organic Virgin and Organic RBD pricing has fallen sharply over the last 12 months, the forecast is for further increases through summer, with costs already having risen from May to June for both raw materials and freight.

Like Coconut Sugar, we are seeing this material increase in demand in response to the lower market pricing and freight rates, stabilizing pricing and showing signs of increases of as much as 10%. We expect stable to small increases in both OVCO and ORBD pricing into the summer and fall “baking season” months.

What this means to you:

Coconut oil is on the higher demand side of the coconut ingredient portfolio, with costs increasing since the pre-COVID levels in first half of 2023. The forecast is for higher rates through at least summer. We are recommending that buyer’s contract or buy material at current costs through at least Q3 2023, with looming international challenges still present and the risk of rising freight costs. We are currently offering discounts on OVCO orders or contracts of over ten totes through August, 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 as much as 75% since start of November.

As Vietnam was one of the hardest hit origins during the pandemic with regard to freight, the recent and sharp decrease is creating fast relief on landed cost for this material. Where possible, we advise that clients follow the trend of ‘cycling inventory’ landed at higher cost basis and restock at current pricing, which may prove to be interim lows.

Demand has seen an uptick, especially for 50% fat organic coconut milk powder, in the last 6 months as buyers try to take advantage of the lower landed costs and discover preferred suppliers.

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 the fastest selling ingredients in our portfolio, we suggest that our clients obtain the inventory needed through the summer due to steadily increasing demand over the last 3 years, and adoption of the powders over traditional liquid materials.

We are offering discounts on all blanket PO’s and contracts for the powders through the end of 2023. Please inquire if interested.

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