While demand increases for most coconut ingredients, signs of raw material and logistics reprieve seem to be lining up for now.

High logistics costs and freight difficulties were the stories of 2021 and the first half of 2022, with Indonesia, Vietnam, and the Philippines continuing to be the hardest hit origins. As we enter the final third of 2022, signs of lower freight costs, paired with more competitive raw material costs on the back of a strong US Dollar spur reason to stock up on inventory while underlying global volatility threats persist.

Desiccated Coconut

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

International freight rates have remained at elevated levels since June, but signs of plateauing and reversal have shown for September. Most suppliers will only provide FOB pricing at this time, due to difficulty in getting vessel space or confirmed outbound shipment dates. While rates appear to normalize, logistics bottlenecks have now become equally if not greater of a problem on arrival in the USA. USWC ports are showing the largest risk of delays on arrival with 2-3 weeks as a standard.

The recent relaxation of international freight costs into the final third of the year has 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 become more aggressive and try to lock in rates for the next 60 days. TCC is offering discounted contracts on desiccated coconut through November.

Organic Coconut Sugar

The 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. We may see the best rates in over a year in September, although pricing is still up two-fold from pre-COVID days.

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. Limited truckers, chassis, and drayage availability on arrival have caused this issue to become just as problematic as international logistics. 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 second half of 2022, and buyers have slowly stepped up to lock in reduced pricing. We recommend that all buyers move to contract at the lower rates in case of any quick swing on freight due to international geo-economic underlying riptides.

Coconut Flour

Organic coconut flour supply is stable from most origins, with product readily available for shipment. Suppliers are booking contracts through the end of 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, now compounded 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 as 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 along with extreme freight rates have resulted in increased pricing on the low-cost organic coconut flour which will remain for the foreseeable future (at least through Q2). If possible, we encourage able buyers to contract this material through 2022, especially at larger volumes. Through November, 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 is seeing a reprieve in Q3. The risk of a quick swing in freight costs back to highs due to high demand for US imports still exists, however.

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 August. To combat freight costs, TCC is currently offering discounts on OVCO orders of over ten totes through October, 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.

Second to Indonesia, Vietnam has been hit hard with freight cost increases in the last 12 months, with almost a 100% increase from July to June. With the reprieve in freight costs finally showing, though, further stabilization of cost on these goods continues.

What this means to you:

Coconut Milk/Cream/Water Powder remains 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 November if possible due to steadily increasing demand and adoption of the powders over traditional liquid materials.

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