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.