Coffee deficit

ANTICIPATED GLOBAL COFFEE DEFICIT MAY PUSH UP THE PRICE WE PAY

As many coffee company’s, including Starbucks, have already commented – they expect to see a significant rebound in retail sales as countries start to successfully tackle the pandemic.

Yet some in the market are speculating that the coffee sector faces a supply chain ‘nightmare’ as demand will outstrip the industry’s ability to deliver.

In the US suppliers are already starting to shrink, which is having upward pressure on wholesale prices. Compounding this is the global shortage of shipping containers which is constraining the ability of the export market to get beans to countries that want them. The industry is braced for further bad news from disruptions as the imbalance between economies that are recovering faster than the countries supplying them.

Add into the mix, a backlog of shipping order and the notable size of coffee stockpiles in the U.S. which have sunk to a six-year low. Despite Brazil’s record crop, a large drop in output after a drought, and congested shipping ports means a global deficit in coming months is expected just as demand rebounds.

Cafes and importers are facing tight supplies and higher costs because of the shipping container shortage that transports the beans from Brazil.

Some roasters are able to draw on their existing inventory rather than raise prices, but with stockpiles sliding and a smaller Brazilian crop coming, an adjustment is probably going to be necessary.

Christian Wolthers, the president of Wolthers Douqué, an importer in Fort Lauderdale, Florida who estimates that shipping costs have more than doubled from Latin America said:

Everybody is feeling the pinch. These bottlenecks are turning into a container nightmare.

Arabica-coffee futures in New York have risen approximately 24% since the end of October following the damage to Brazilian crops from the adverse weather conditions. In February, inventories of U.S. green beans slid 8.3% from a year earlier to the lowest since 2015.

The diminished inventories mean less to cushion the expected decline in Brazil’s crop, which will constrain supplies and push up costs.

As the world is slowly easing out of Covid-led national lockdowns and vaccinations are being rolled out, people are expected to consume more coffee ‘out-of-home’.

For now, many merchants are trying to hold hiking up prices as they work to lure customers back to cafes and restaurants.

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