Dried Fruit

Desiccated coconuts: weather-related production declines

April 24, 2024 at 2:36 PM , Der AUDITOR
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MANILA. Lower raw material production due to El Niño, rising freight costs and geopolitical tensions are just some of the hurdles the coconut market has to face. Market players are correspondingly cautious.

The difficulties persist

The coconut market continues to face massive hurdles, as the experts at JASCORP also emphasise. The El Niño weather phenomenon has caused major problems in many important growing countries, including Indonesia, the Philippines and Sri Lanka, which are suffering from a resulting shortage of raw materials. This is leading to fierce competition between the various stakeholders, such as desiccated coconut and coconut oil producers, resulting in sharp price increases. The difficulties extend throughout the entire supply chain, resulting in sometimes severe delays in production and delivery. T.M. Duché's team of experts also refers to current data from the United States Department of Agriculture-Foreign Agricultural Service in Manila, according to which Philippine coconut oil exports are expected to fall by around 21% to 900,000 mt in 2024-2025 as El Niño affects production in 46 provinces.

Good and bad news from the freight sector

JASCORP also reports that geopolitical tensions, particularly in the Middle East, are also contributing to the challenges facing the market. Attacks by Houthi rebels in the Red Sea are forcing cargo ships to be diverted via the Cape of Good Hope, which is further exacerbating delays. This in turn causes a shortage of goods in the destination countries. Freight costs are also rising. Meanwhile, there is better news from the Panama Canal, as T. M. Duché reports; more rainfall is forecast here, meaning that the canal can be fully utilised again, which is beneficial for shipping traffic on the US East Coast.

Situation could deteriorate further

The experts at JASCORP are also monitoring the situation in the Persian Gulf with some concern. Iran is an important supplier and the political tensions could drive crude oil prices up sharply, which would also further increase the production costs for coconut products as well as freight costs. One option could then be alternative energies such as biofuels based on vegetable oil, for example palm or coconut oil. The main thing here is to keep a close eye on the situation. Overall, the market situation could become even more acute in Q3 and Q4, as demand is usually particularly high then.

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