Brazil’s top coffee producer has worst frost and record shipping rates in decades Coronavirus disease Retail prices are expected to push up to multi-year highs in the coming weeks.
After the prices of other commodities such as bread, vegetable oil and sugar have risen, the rise in coffee prices will further increase the cost of shopping baskets. The United Nations Food Program’s World Food Price Index for July showed a year-on-year increase of 31% when many consumers were in financial trouble due to the pandemic.
The worst cold snap in Brazil since 1994 has caused the price of green coffee beans to rise to the highest level in the past seven years. It is expected that consumers will be affected when they buy roasted coffee beans or coffee powder in supermarkets.
In the past 12 months, Arabica coffee prices on the ICE Futures American Exchange have doubled, and Brazilian crops have withered after experiencing the worst drought in 91 years.
The damage is still being evaluated, but in areas where coffee trees cannot survive, it may take up to seven years for production to fully recover.
Shipping disruptions are partly due to the surge in demand for consumer goods, and the global coronavirus pandemic has caused people to stay at home, resulting in insufficient ships, which has also led to a sharp increase in the cost of transporting beans to major consumer countries in North America and Europe.
Traders believe that although consumers will soon have to pay more to buy coffee from supermarkets, the cost of latte or American coffee at high street coffee chains may not keep up in the short term.
“Roasting and grinding (coffee in the supermarket) only has coffee and some packaging. Your coffee at Starbucks may not increase in price (that much) because you pay more for the store, Wi-Fi, and experience,” he added road.
According to data released by the US Bureau of Labor Statistics, the average price of coffee powder rose to a peak of US$4.75 per pound in April, a year-on-year increase of 8.1%, the highest level since July 2015, because the drought had an initial impact on Brazilian crops.
The price increase of Arabica coffee on the ICE Futures US Exchange has accelerated rapidly, however, after the recent frost, retail prices seem certain to rise accordingly. According to data from the Bureau of Statistics IBGE, Brazil is the second largest consumer in the world after the United States, and the price of roasted and ground coffee rose 3.4% in June.
They will rise further. After the July frost, Brazilian coffee industry group Abic asked roasters to analyze costs and adjust prices accordingly to maintain business sustainability.
Abic estimates that from December to late July, the price of green coffee from Brazilian roasters increased by about 80%.
“Some companies, including market leaders, have announced price increases,” Abic said in a letter to relevant roasters seen by Reuters.
JDE Peet’s brands include Douwe Egberts, Kenco and Peet’s, and it pointed out that raw materials, freight and other costs have risen sharply in the past 12 months.
“Historically, large fluctuations in green coffee prices have been reflected in the market (retail prices), and we expect this precedent to continue,” the company said.
transportation cost
Rising transportation costs associated with the shortage of containers may play an important role in pushing up prices. Coffee is usually transported in containers, while commodities such as grains are transported in bulk ships.
Many coffee companies have found that, at least in the short term, it is easier to bear the cost of coffee beans than to increase shipping costs, because they usually determine the purchase price months in advance.
Nestlé CEO Mark Schneider said at a recent meeting: “We have hedged most of the coffee demand here for the rest of this year or even part of next year, so I won’t worry about this in the short term. One point.” The conference call, adding that transportation costs are not the case.
Carlos Santana, chief coffee trader at Eisa Interagricola, a subsidiary of ECOM Trading, said that delivering coffee is very challenging, especially in the Americas.
“It’s almost uneconomical to use this route now. The US ports are full and shipping companies don’t want to ship more goods there, so they charge more. The price is more than three times higher than before the pandemic,” he Say.
Thiago Cazarini, a coffee broker in the Brazilian state of Minas Gerais, said that even if they pay a much higher price to get a container, exporters have encountered problems when loading them on a ship. problem.
He said that this problem is very common and affects all players.
“Brazil is very messy in terms of logistics now. I have coffee that should have arrived two months ago, but I haven’t got it yet,” said an American coffee importer.
Julian Thomas, Managing Director of Maersk Brazil, which is part of the world’s largest container shipping company
Line stated, “The bottlenecks and strong demand caused by the current measures to contain the pandemic are also affecting the supply chain inside and outside Brazil.”
“We are still serving our customers to meet their growing needs,” he told Reuters.
German container shipper Hapag-Lloyd added that there were delays in the transportation of goods, “but not just coffee.”
Brazil is estimated to account for 30% of global exports, and its peak shipping season has already begun.
(Additional reporting by Maytaal Angel in London and Ana Mano in São Paulo; editing by Veronica Brown and David Evans)
