The Coconut Company - November 2024 – update on global coconut demand & supply issues:
The global coconut industry is currently navigating a period of significant challenges due to supply shortages, fluctuating raw materials and logistical issues. Key coconut-producing countries, including the Philippines, Sri Lanka, Indonesia and Vietnam, have reported various disruptions in supply due to factors like adverse weather conditions (El Niño and typhoons) and high demand from markets scrambling to catch up with lower inventories (such as China, the US and EU).
Price Increases and Supply Shortages: Coconut milk and cream prices have surged in recent months in Sri Lanka and The Philippines. These high prices are expected to persist until well into 2025 due to low stock levels and limited supply availability in major markets like Europe and the U.S. Coconut sap (used to make coconut sugar, nectar and coconut aminos) remains in low supply due to the difficulties faced in the collection of this material when weather conditions are unfavourable. The industry is still facing issues due to the supply chain risks inherent in the collection / processing of the sap (S02 and gluten). Buyers are urged to ensure all product is tested for these allergens prior to purchasing.
Production Constraints: The Philippines and Sri Lanka, two of the largest coconut exporters, are experiencing lower yields due to smaller crop sizes from the unpredictable weather. The Philippines may see large production cutbacks due to lower yields, with most suppliers fully booked for 2024. Sri Lanka’s harvest has also seen a large decrease, with high prices for raw materials and shipment delays resulting from this shortfall. The erratic weather is expected to extend until late spring 2025 and could further constrain supply in both regions, making it difficult for factories to meet demand at year end and into early 2025.
Shipping and Logistical Challenges: Although shipping rates have decreased a little in recent months, logistics issues remain such as port congestion and changing vessel schedules, adding to the already high costs and causing delays. These issues are particularly concerning for Europe, where buyers are competing to cover their 2025 needs early, given the current low availability and uncertainty. This situation is exacerbated by the threat of violence in the Red Sea. At the time of writing, many vessels are still avoiding the Red Sea region due to ongoing threats from Houthi rebels. Taking a longer route around the Cape of Good Hope increases shipping times, fuel used and costs. While much of this cost has already been priced into shipping rates since the crisis began, we don’t see this situation resolving anytime soon.
Recommendations for clients: We recommend securing coconut supplies as soon as possible and planning for coverage well into Spring 2025. We believe the market will stabilse by mid-2025 and we hope to see reduced price pressures after Spring, so it may be better to postpone locking into longer term contracts until 2025. Proactive sourcing and a constant dialogue with factories are currently needed.
Follow us for more coconut news and sourcing updates.
