Desiccated Coconut Market News 27.11.24
Last week, we received some unexpected news from the Philippines coconut industry. Franklin Baker, one of the world's oldest and largest producers, has ceased operations at all three of its factories - at least temporarily. For years, Franklin Baker has reportedly been seeking potential buyers or investors, though with limited success so far. While official confirmation from the company is still pending, it seems the shutdown will continue until a viable solution is found. Given Franklin Baker's substantial market share, the impact on supply is expected to be profound, especially in an already tight market where Philippine producers are sold out through February 2025.
Compounding this issue, the Philippines is currently grappling with the effects of La Niña, which is forecasted to persist until February 2025. The abnormal rainfall associated with La Niña raises the risk of flooding and other disruptions. This further hampers the production capacity of DC factories. Adding to the strain, coconut oil prices are nearing the $2000 mark. Robust demand is driving this, due to a shortfall in Indonesian palm oil.
To make matters more challenging, China has been aggressively purchasing fresh coconuts from Indonesia, Vietnam, Malaysia, and the Philippines. This increased demand has led Philippine producers to temporarily withdraw from the market as they monitor the situation before making new offers.
In Indonesia, producers are also feeling the pressure. They are citing a shortage of raw coconuts due to China's heavy buying from spot markets. Some factories have advanced their annual maintenance shutdowns. Those still operating are running at just 25% capacity and struggling to meet shipment schedules.
In Sri Lanka, the situation is even more dire. Many mills have drastically reduced production due to soaring prices and a severe scarcity of raw materials.
As is customary across the coconut industry, many factories globally will close for 2-3 weeks during the Christmas season. This break allows workers to enjoy the holidays with their families while providing time for essential maintenance. However, in the current climate, this downtime adds further pressure to an already fragile market.