Posts in category: Market Updates

As we move deeper into Q4, significant shifts are affecting the coconut market across production, freight, and supply chain factors. Here’s an overview of the current landscape:

Supply

Coconut mills across all origins are operating at reduced capacities due to raw material shortages. This supply issue is driven by a combination of factors:

• El Niño Impact: Poor weather conditions throughout the 2023/2024 El Niño season have reduced harvests.
• Rising Global Demand: Coconut oil and other coconut products remain in high demand, further straining available resources.
• Exports to China: There has been an increase in raw nut exports to China, reducing the supply available for processing.
• Weather-Related Disruptions: Recent heavy rains and flooding have severely impacted harvesting and transportation.

It is worth remembering that mills are unable to secure long term supply of nuts, unless they have their own plantations. This means that whilst they may enter into long term fixed price contracts they are at the mercy of the spot market for raw material, and factories have not been able to keep pace with increasing prices. 

Shipments are delayed across all origins by a number of weeks, if not months.

See below slide for price movements on Sri Lankan Fresh Coconut supply during 2024.

Freight Updates

After a mid-year surge, freight rates from Southeast Asia declined in September and October.  This trend has reversed as Shipping lines have implemented General Rate Increases (GRI’s) in November which appear to be holding.

See graph below containing the Shanghai Containerised Freight Index:

Lauric Oils Market

The prices for coconut oil have increased significantly from lows of $1,000 per tonne in October 2023 to over $1,700 per tonne in October 2024. This price shift is closely linked to movements in Palm Kernel Oil. 

See below graph for Coconut Oil / Palm Kernel Oil analysis:

Weather Risks

The Philippines has experienced multiple typhoons this season, significantly impacting agriculture and the coconut industry. One of the latest, Typhoon Kristine, caused considerable damage across the Bicol region and nearby provinces, including Quezon, Batangas, and Laguna.

This update provides insights into the current landscape and factors affecting coconut supply. We’ll continue to share the latest developments as they arise. Thank you for staying informed, and please reach out for more information or to discuss specific supply chain needs.

As the global coconut market continues to face new challenges and opportunities, it is crucial for manufacturers and buyers to stay informed. Helios Ingredients is pleased to share our latest market insights, which cover the current state of coconut product supply, pricing, and market trends.

Impact of Weather on Coconut Supply

One major factor affecting the current market is weather. The Philippines, a major global supplier of coconut products, has been hit by exceptionally wet weather, which is causing disruptions across the supply chain. Heavy rainfall is hindering harvesting and processing of raw nuts, as well as the resulting manpower shortages are exacerbating supply delays.

Additionally, the Philippines is at high risk of severe typhoons through to the end of the year. These natural disasters could further impact the availability of raw materials, increasing pressure on an already strained market. Manufacturers sourcing from the Philippines should anticipate continued delays and potential price increases as weather conditions worsen.

Shipping Challenges and Costs

In September 2024, shipping rates from the Far East have seen a slight dip, providing temporary relief for buyers. However, the coconut industry still faces significant challenges. Availability and reliability continue to be problematic, with ongoing port congestion and erratic shipment schedules causing delays in deliveries.

Freight rates, though lower than their recent peaks, remain volatile, and buyers must account for the potential of further rate increases as we approach the holiday season. The logistical hurdles in shipping coconut products to key markets such as Europe could impact costs and lead times, making it essential for manufacturers to plan ahead to ensure consistent supply.

Rising PKO and CNO Prices

The coconut oil market has experienced notable price fluctuations in recent months. Crude coconut oil (CNO) prices have risen from $1,544/ton to $1,660/ton CIF Rotterdam, representing a significant increase over a short period. The main driver behind this rise is the sharp increase in palm kernel oil (PKO) pricing, which is closely linked to coconut oil due to their similar applications in the food and cosmetic industries.

The surge in PKO prices is largely a result of supply constraints and increased demand from various sectors. As a result, CNO prices are expected to remain elevated for the foreseeable future, adding to the cost pressures faced by manufacturers who rely on coconut oil as a key ingredient in their products.

Sri Lanka Coconut Market Dynamics

Sri Lanka, another key player in the global coconut market, has seen a sharp rise in raw nut prices. In just one month, prices have jumped from 85,087 LKR per 1,000 nuts to 92,107 LKR. This unexpected surge has caught many in the industry off guard.

The increase in demand, combined with rising prices, has placed pressure on Sri Lankan factories, many of which are now struggling to meet their contractual obligations. Additionally, the strength of the Sri Lankan Rupee ahead of government elections on 21st September has further increased USD pricing.

Factories that have long-term contracts in place are finding it difficult to absorb these rising costs, leading to potential disruptions in supply. 

Indonesia Coconut Market Update

Indonesia has also experienced a sudden and unexpected increase in raw material prices. This spike is attributed to the diversion of coconuts to coconut oil (CNO) processors, which has reduced the availability of raw nuts for other uses. The result has been higher prices across the board, with some factories defaulting on their contracts due to the increased costs.

Vietnam Coconut Market Trends

Vietnam continues to offer competitive pricing for coconut products, particularly from fair average quality (FAQ) mills. However, premium coconut processors in the country have shifted their focus away from desiccated coconut (DC) trading to concentrate on aseptic coconut products, which are in high demand globally.

Demand and Availability in Europe

The European market continues to face low stock levels, with large buyers actively seeking to cover their first-half 2025 requirements. However, the availability of coconut products remains limited.

This situation is putting upward pressure on prices, as competition for available stock remains. Manufacturers who have not yet secured their raw material needs for 2025 should act quickly to avoid potential shortages. Early action is essential to lock in supply and mitigate the risks of further price increases.

Conclusion

The global coconut market is facing significant challenges, from weather-related disruptions to rising prices and logistical hurdles. At Helios Ingredients, we are committed to providing our clients with timely and accurate market information to help them make informed decisions.

As we move into the final quarter of 2024, it is clear that supply constraints will continue to impact the availability and pricing of coconut products. Manufacturers are advised to plan ahead, secure their contracts early, and stay in close communication with their suppliers to ensure a steady flow of raw materials.

For more detailed information or assistance with your coconut supply needs, please do not hesitate to reach out to our team. We are here to support you in navigating these complex market conditions and ensuring your business remains resilient in the face of ongoing challenges.

Good morning,

We are pleased to share our latest insights on the coconut market, which has seen significant changes and challenges in recent months due to various influencing factors.

Weather Impact

The ongoing El Niño-related drought conditions have significantly impacted coconut yields since Q4 2023. While some regions in Indonesia are beginning to see improvements in supply, the situation in the Philippines is worsening. The country is currently in its typhoon season, which lasts until the end of the year, and the occurrence of a major typhoon could further escalate prices. Several factories in Luzon, Philippines, are still in recovery mode following the damage and supply disruptions caused by Typhoon Aghon in May.

Shipping Challenges

The shipping industry from the Far East to Europe is experiencing a turbulent period. Freight rates have tripled over the past few months, primarily due to the Red Sea Crisis, which has led to:

• Longer lead times
• Higher costs for fuel, labour, and insurance
• A shortage of available containers, congested ports, and disrupted shipment schedules

Retailers are advancing shipments to secure supply for the Golden Quarter (Christmas), prompting shipping companies to apply surcharges and increase rates. This scenario is reminiscent of the COVID-19 pandemic period when shipping profits soared.

PKO and CNO Prices

Below is a chart illustrating price movements since 2010 and the impact of El Niño. As shown, there is potential for prices to continue rising throughout the year. This trend is driven by the tight supply and increasing demand for PKO (palm kernel oil) and CNO (coconut oil).

Other Origins

Sri Lanka is grappling with unprecedented demand due to supply shortages and increased prices from other origins. This has further strained the global coconut market, pushing prices higher as supply remains tight.

Financial Stability of Key Coconut Processors

The financial health of many coconut processors has been weakened by very low prices in 2022 and early 2023, coupled with poor demand, increased overheads, and higher borrowing costs. We have observed defaults from various processors who are unable or unwilling to honour lower-priced contracts.

Demand and Availability

Many processors in the Philippines are sold out for 2024 and are behind on their commitments. Stock levels in Europe remain low, and we recommend that customers cover their remaining 2024 needs as soon as possible, as offers for 2025 are currently rare.

We remain at your disposal for any further information or inquiries. Please feel free to contact us to discuss your requirements and secure your supply.

The global desiccated coconut industry is currently facing concerns regarding the production of desiccated coconut in the Philippines. The extended dry season is impacting the average yield, causing significant worries according to trading sources.

Impact of Dry Weather on Production

The prolonged dry season has hit coconut plantations hard, leading to reduced yields. Despite moderate and heavy rains caused by Typhoon Aghon in the week ending 1st June, the rainfall has not been sufficient to recover the average yield levels. This situation is exacerbated by the increasing sea shipping fares due to congestion in Chinese ports, further impacting the supply chain and raising international prices.

Government Response and Budget Allocation

In response to the situation, the Philippine government is revising its farming budget to support coconut farmers. The plan includes planting around 100 million new coconut trees and allocating approximately 2.5 billion pesos (equivalent to $42.6 million) for securing fertilizers. This initiative aims to mitigate the effects of the dry season and boost production in the coming years.

Market Trends and Export Data

Despite the current challenges, the Philippines and Indonesia have shown an increase in desiccated coconut exports at the start of 2024. Philippine desiccated coconut exports reached 27,270 metric tons, valued at $38.8 million, during January-February 2024. This represents a 35% increase in value and an 11% increase in volume year-on-year.

Rising Demand and Price Increases

The rising demand for desiccated coconut, coupled with supply constraints, is leading to price increases. Driers and beverage manufacturers are working hard to secure their supply, and price adjustments are anticipated in the second half of 2024.

Conclusion

The desiccated coconut industry is navigating through a challenging period due to weather conditions and logistical issues. However, with government support and strategic planning, there is hope for stabilization in the future. We will continue to monitor the situation and provide updates as new information becomes available.

For more detailed insights and updates on the desiccated coconut market, stay tuned to our Market Updates. We welcome your comments and inquiries.

Source: IHS Markit