With demand for organic coconut ingredients stabilizing, raw material and logistics costs show reprieve.
The first three quarters of 2022 continued the trend of high logistics and freight difficulties, with Indonesia, Vietnam, and the Philippines being some of the hardest hit origins. As we enter the final quarter of 2022, though, significantly reduced freight costs, and more competitive raw material costs on the back of a strong US dollar spur reason to stock up on inventory while underlying global economic volatility threats persist.
Desiccated Coconut
Raw material and production costs from Filipino and Sri Lankan suppliers are finally showing signs of normalization. At the same time, freight costs seem to be retracting, causing significantly improved landed rates on lower-cost desiccated material.
International freight rates have seen a rapid decline over the last 2 months, with pricing finally getting closer to pre-COVID levels. While int’l rates normalize, logistics bottlenecks have now become equally if not greater of a problem on arrival and locally in the USA. USWC Ports have the largest risk of delays on arrival with 2 weeks being the norm.
Heading into the final quarter of the year, declines in international freight costs have spurred buyers to step in and contract at the lower rates, balancing out the demand/supply and stabilizing pricing.
What this means to you:
With the relaxed international logistics costs, buyers can potentially become more aggressive and try to lock in rates for the next 90 days. TCC is offering discounted contracts on desiccated coconut through the end of the year.
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 see rates significantly higher than pre-COVID levels. The forecast is for the best rates in over 2 years in October, but rates are still up 50% since the start of COVID.
Raw material for coconut sugar continues to have 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 now stronger than international, with limited truckers, chassis, and drayage availability on arrival. Please expect delays and limited stock on the West Coast, 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 due to the underlying international geo-economic riptides.
Coconut Flour
With demands for organic virgin coconut oil remaining high yet stable, organic coconut flour supply has become increasingly stable from most origins, with product readily available for shipment. Suppliers are booking contracts through the end of 2022 at this time. 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.
Demand for coconut flour has increased of late, as buyers step in at the 10%+ lower landed cost/rates.
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 and higher freight rates have increased pricing on the low-cost organic coconut flour. Higher pricing will remain for the foreseeable future and at least through the end of the year, with some relief from 1H 2022 pricing. We encourage able buyers to contract this material through 2022 if possible, especially at larger volumes. Through December, 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, resulting 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 and RBD is seeing a strong reprieve into Q4, with some risk of a quick swing on freight back to highs with demand on US imports still high.
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 will last through December. To combat freight costs, TCC is currently offering discounts on OVCO and ORBD orders of over 5 totes through December, 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 remains on the higher side since the start of the pandemic.
With reprieve in freight costs finally showing, further stabilization of cost on these goods continues to show promise, however, demand remains high and increasing.
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 December if possible due to steadily increasing demand and adoption of the powders over traditional liquid materials.
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