To understand the phenomena creating supply chain disruptions, we can examine one example: the coconut market in Southeast Asia.
A series of typhoons and floods in the Philippines last October and November exacerbated earlier Covid-related production problems for all coconut products. In a normal year, other coconut-producing countries in Southeast Asia and/or South America would pick up the slack easily, but because of the quarantine shutdowns and delays, this has not been easy to recover from. By late February, the natural supply had recovered, but demand had become higher due to a combination of easing of restrictions worldwide and the earlier lack of supply.
Making the problem even worse is a lack of available shipping containers and space on boats shipping out of Asia due to the disruption of import/exports in much of the world for the majority of 2020. This created an imbalance, as there are now ports in some parts of the world that have empty containers sitting there with no product available to ship out. Shippers are unwilling to send empty shipping containers because the cost of putting the vessel on the water is over $4,000. But because there is so much product coming from Asia, there are little or no empty containers available. Additionally, almost all shipping in Asia goes through Hong Kong at one time or another and there are tremendous delays in that port for various reasons.
Now, with the Covid-19 vaccine leading to an easing of restrictions here in the US and other places, demand for all types of coconut products are on the rise. Even though coconut production has returned in many parts of Southeast Asia, and warehouses are now filled with orders ready to ship out, there are no containers —and often no vessel space— available. Because the warehouses are full, there is an inability to produce more until the capacity is freed. To free capacity, importers are forced to pay a premium freight or simply wait for something to change. And, as you can see, without being able to move this packed product, production of the new product is delayed, and this vicious cycle goes on. Of course, this leads to delays and/or price increases at origin and potential out-of-stocks in the rest of the world.
This is just one popular ingredient, but we can apply this example to many crops/ingredients across the food chain. Then we have to think about the pressure this creates when it comes to availability and pricing of many finished products on the market as well.
If you have questions about the coconut market or any other problematic area of the supply chain, please do not hesitate to contact us.
The Ace Natural Team
Phone: (718) 784 6000