Coconut Market Report – December 2020

Philippines

Year on year the Philippines is approximately 25% down on exports for all coconut related products, with Desiccated Coconut at -29.6% and Coconut Oil at -27.2%.  This is mainly due to COVID-19 reducing production capacity across the producing factories. During September and October shippers were starting to make headway catching up on delayed contracts, however three strong typhoons within November put paid to that and shipments have slipped back again. The typhoons were particularly strong across the northern part of the Philippines where many coconut factories are situated. This has resulted in 2-3 weeks production being lost in the short term with some areas affected for the next 6-9 months as many nuts were lost off the trees. The initial stretch from Camarines Sur up to Sorsogon and Bondoc Peninsula was one of the worst affected areas. On the back of this and due to strong demand from China, Brazil, Malaysia and Russia, Palm Oil as well as Coconut Oil levels have leapt to highs not seen since 2017 at over 1500 dollars per tonne CIF Rotterdam. When Coconut Oil prices move up, desiccators must increase their buying prices to compete against the oil mills for raw nuts from the farmers. Consequently, desiccated prices have jumped over $400 per tonne from where we were a few weeks ago and appears to have stabilised at this new high. 

Indonesia

With limited raw nut availability due to heavy rains across the region and stiff competition from oil mills there are few offers from Indonesia. The offers that are available have tracked Philippine levels on an upwards trajectory. Quarter one shipments out of Indonesia tend to be somewhat unpredictable due to the heavy rains across the period and we do not expect this year to be any better. There are suggestions La Nina conditions will cause the region to have even higher levels of rainfall than normal. With the Ramadan period spread over the months of April and May this year we anticipate low output during the second quarter when many factories traditionally close. 

Sri Lanka

Si Lanka is effectively still out of the market due to high prices for domestic Coconut Oil. This makes the raw material for desiccators very expensive and an FOB level above US$3000 per tonne for Fine and Medium grades.

Ocean Freight

Ocean Freight from Asia to Europe has been increasing steadily over the last 2-3 months due to the imbalance in trade and a stockpile of shipping containers amassing in Europe. Obtaining containers in Asia has become a very real problem. The situation has snowballed over the last few weeks with over a US$400 per TEU increase coming into effect in December. This increase is significantly impacting importers and customers alike, especially given the short notice as well as forceful implementation across the board. The UK is being penalised to a further extent with a US$300 surcharge due to port congestion with Brexit stock build, Christmas and PPE equipment clogging the system.  Even with these enormous surcharges some shipping lines refuse to do business to the UK at all! First Grade has used one of the larger carriers, CMA line, for many years and is considered a regular customer, however this month our business from Asia has been refused. They just do not want to ship to the UK regardless of rate. Excessive freight rates look set to be a problem beyond the Chinese New Year in February so prices will be affected for contracts through to June 2021 at least with even further increases being rumoured.

Summary

With shortages across all the major origins and little drop off in demand we see prices remaining strong through to the middle of 2021 at least. Historically coconut prices tend to rise very quickly and sharply and then take many months to recover again with the limited capacity in this market.  Any major buyers not covered yet through to September 2021 at least, should, in our view, be concerned about supply. With the disruption in shipments right now we recommend buying from suppliers with some very large stocks as shipments cannot be relied upon to arrive in time.