BUY THE 2026 PRICE — BEFORE THE 2027 WEATHER PREMIUM

The most important commercial message from the recent Barclays’ El Niño report is straightforward: the remainder of 2026 may offer buyers a valuable opportunity to secure stock before weather-related shortages and higher replacement costs become fully reflected in 2027 prices.

This does not mean that prices will rise immediately or in a straight line. It means that the cost of holding a sensible level of inventory today may be considerably lower than the cost of remaining entirely exposed to the 2027 spot market.

Today’s buying opportunity

As at 31 August 2026, Philippine desiccated coconut was quoted at an average of 132.83¢/lb, approximately US$2,928/MT FOB. This price has remained unchanged for 28 weeks and is around 21% below August 2025.

However, Philippine domestic replacement values are moving in the opposite direction. Manila prices increased to an average of ₱5,705.50 per 100-lb bag, almost 8% above the previous year. The static export quotation should therefore not be interpreted as evidence of abundant future supply. It reflects a quiet nearby market at a time when processors’ underlying replacement costs are already strengthening.

Coconut oil presents an even clearer purchasing argument. The nearest-forward Rotterdam seller average is approximately US$1,962.70/MT CIF, around 28% below August 2025 and 8% below the Philippine Coconut Authority’s US$2,140/MT European reference on 8 January 2026. February–March 2027 sellers are already asking approximately US$2,095/MT, nearly 7% above the current nearest-forward average.

What the Barclays scenario could mean for costs

The BigGo article reports Barclays’ view that a potentially record-strength El Niño could peak between late 2026 and early 2027. Under its 18-month scenario, Barclays projects increases of:

Applied illustratively to today’s coconut oil reference of US$1,962.70/MT, a 30–40% rise would produce a range of approximately US$2,552–2,748/MT. That represents an additional US$589–785/MT before any changes in freight, currency or European handling costs. These are scenario calculations based on the article, not guaranteed price targets. BigGo Finance

A company buying half its anticipated requirement at today’s level and half after such an increase would achieve a theoretical blended commodity cost of approximately US$2,257–2,355/MT. That is US$294–393/MT below the cost of purchasing the entire requirement at the higher price, before allowing for finance, storage and insurance.

Barclays does not provide a separate forecast for desiccated coconut. Nevertheless, desiccated coconut and coconut oil compete for the same supply of mature nuts. Reduced nut availability, lower kernel weights and stronger demand from oil mills would therefore be expected to raise desiccated coconut replacement costs, although not necessarily by the same percentage as coconut oil.

This is not only a coconut problem

The potential exposure for European food manufacturers is much wider. The European Commission identifies rice, vegetable oils—particularly palm oil—coffee and tea, tropical fruits and spices among the EU’s important agri-food imports from ASEAN.

Many of these products originate within the same Southeast Asian weather system. A severe El Niño could therefore affect several purchasing categories simultaneously rather than allowing manufacturers to offset higher coconut costs with cheaper palm oil, coffee or other regional ingredients. Agriculture and rural development

The climate risk is supported by official forecasts. NOAA currently assesses a greater than 90% probability of a very strong El Niño during autumn and winter 2026–27, while PAGASA expects the event to continue into the first half of 2027. PAGASA forecasts particularly widespread below-normal rainfall during November 2026 and January–February 2027. The effects are not guaranteed in every growing area, but the probability of material disruption has increased. Climate Prediction Center

Our commercial view

The final months of 2026 should be treated as a risk-management window. Buyers should consider securing a first tranche of their 2027 requirements now—through physical inventory where product life and storage conditions permit, and through forward-delivery contracts where holding additional stock is impractical.

The objective is not to speculate on the market or purchase the entire annual requirement at one price. It is to place enough 2026-priced material into the supply chain to lower the company’s average cost and protect production continuity if the Barclays scenario begins to develop.

For desiccated coconut, priority should be given to essential grades, certified material and specifications with limited origin flexibility. For coconut oil, staged purchasing can provide protection without committing the entire requirement before the size of the crop impact is known.

The question is no longer whether today marks the absolute bottom. It is whether the cost of carrying some additional stock is preferable to entering 2027 with no protection against a possible 30–40% increase in coconut and palm oil prices—and simultaneous inflation across other Southeast Asian food imports.

Cameron Dick

Director
TM Duché & Sons Ltd