Thatch is a item that floats by and is classified as ocean debris. Thatch is used to craft rope and is used for building items such a wall windows. Thatch can also be found if a player cuts a palm tree or if they break a wall or wall window.
Thatch was changed to "palm leaves" in the official Steam release. Palm leaves can be found on islands, barrels, and as ocean debris. They can be used as building materials.