Market Update 1st November 2023

As we draw into quarter four and the run-up to the holidays, there are still several challenges facing the coconut industry in the Philippines.

PAGASA, the state weather bureau of the Philippines, warns that more tropical cyclones may hit the country until the end of the year and into 2024.

According to PAGASA, the El Niño weather system that began in March and weakened in July, is expected to reach its peak between November 2023 and January 2024.

This could lead to below-normal rainfall conditions in most parts of the country until the first half of 2024.

The drought caused by El Niño reduces the yield and quality of the coconuts and increases the risk of pests and diseases.

The United Coconut Associations of the Philippines (UCAP) estimated that the country’s coconut output might drop by 6.9 percent to 2.1 million metric tons in copra terms this year from 2.26 million metric tons in 2015.

The Philippine Coconut Authority (PCA) has implemented some measures to mitigate the effects of El Niño, such as providing water pumps, fertilisers, and seedlings to affected areas.

However, these may not be enough to cope with the prolonged dry spell and the expected increase in demand for coconut products in the global market and push up prices into 2024.

December is also a short production month. with factories closed over the holidays, and while this is a known factor, it is worth remembering that this always causes extra delays in shipping.

Shipping has been consistent in the past few months. However, we are currently seeing increasing delays, the recent rise in the cost of transit through the Suez Canal. Shippers will be passing on the additional costs to customers.

The average long-term rates in the Far East-North Europe Lane have declined 69% year to date to $2,274 per FEU as of September 2023. The average long-term rates in the Far East-Mediterranean Lane are down 63% year to date, to $2,332 per FEU.

The 2M alliance partners MSC and Maersk have reduced their winter schedule coverage for Asia–North Europe until December 2023 to cope with the falling demand and these low freight rates on the route.

We are still seeing growth in the global coconut oil market, which is expected to grow from $4.48 billion in 2023 to $6.46 billion in 2027, according to a market report by ReportLinker.

The crude oil markets, according to OPEC+ will maintain production cuts of 5.8 million bpd until the end of 2023 to balance the oil market.

StanChart analysts predict an increase in oil prices due to Saudi Arabia’s effective production restraint. Brent prices are expected to exceed this year’s high of $89.09/bbl and may reach a high of above $100/bbl during Q4.

The global oil demand is expected to continue to grow (2.44 million bpd in 2023 and 2.45 million bpd in 2024, according to the OPEC Secretariat Oil Market Report).

As ever, we recommend that you contact us well in advance of your expected demand to ensure we can meet your delivery criteria and avoid any delays.