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.