Global coffee prices are likely to remain higher for longer as the market struggles to rebalance supplies geographically.
This is the result of disruptions to transportation of coffee around the world, due to container shortages and port congestion.
This emerged during the Swiss Coffee Trade Association’s (SCTA) recent annual conference, where traders and analysts said transportation challenges were preventing available supplies from being moved quickly to meet demand in some areas of the world, boosting the price of the commodity.
“There is clearly a risk of higher prices. The market is scrambling for some kind of equilibrium, but has not found that yet,” Ben Clarkson, head of the coffee platform at agricultural commodities merchant, Louis Dreyfus, said.
Arabica coffee prices in the US were approaching their highest level in seven years in the last week of October, as a result of the forecast of reduced supplies from the world’s top coffee producer, Brazil, following drought and severe frost, Reuters reported.
“We believe in a deficit of around four million bags, other analysts see it as high as seven million bags,” Carlos Mera, head of agri commodities market research at Rabobank, told delegates.
He added that that exports from Brazil and other coffee-producing countries had been slowed down due to bottlenecks experienced with shipping.
Nhung Ly, managing director at COMCO Trading in Vietnam, the world’s second-largest coffee producer, said the country was expecting to have a large harvest in the 2021/2022 season.
This would add to the already large carry-over stocks from the previous season, with trading companies already struggling to ship coffee out of the country, he added.
While the current high prices would ultimately boost production in other countries and regions such as Colombia, Central America and Africa, which would lead to a more balanced supply, this would take time.
However, Hadi Ghaderi, an expert in logistics and supply chain management at Swinburne University in Melbourne, Australia, said increased demand for coffee would also keep prices high.
“The [COVID-19-related] lockdowns and working from home have created a demand for coffee and high-end coffee machines,” he said.
According to the International Coffee Organization, global exports of Arabica beans, the most popular coffee bean variety in the world, was expected to amount to 82,63 million bags in the current financial year, compared with 78,89 million bags in the previous financial year.