There are three main contributors interrupting the coffee supply chain that are important to talk about. The continuous pressure of climate change on coffee production, the forever increasing coffee demand, and lastly, globally impacting logistic issues. In June 2021, the International Coffee Organisation (ICO) composite has recorded an eight month straight increase in coffee prices, with a 4.6% increase on May 2021.
Climate & Production:
Brazil is experiencing the direct impact of climate change with adverse weather conditions in the Arabic coffee regions. Early on, little to no rainfall and hot temperatures in Brazil has led to a continuous drought, which according to the US Department of Agriculture, are factors set to decrease coffee production by 19% compared to the previous year’s output. To add to the climate fuelled pressures this region has faced, more recently the have had a ‘freak’ frost. The unusual cold snap across the Brazil belt has left significant damage to the coffee trees, harming the outlook for the upcoming harvest. Following the snap frost, Arabica coffee prices rose 10% to the highest price per pound seen in six years.
Globally, coffee production experienced slight increases. However, not enough to support the continuation of growth in demand, with the world’s coffee consumption increasing by 1.9% in 2020/2021, crawling back to pre-COVID-19 levels. As it stands, coffee demand is still sitting 1.4% below the supply, however, this is due to change. Analysts predict, as the world eases COVID-19 restrictions, that coffee consumption will increase, and demand will continue to climb higher than before.
Shipping & Logistics:
Another contributor to the increased demand and reduced ability to supply the coffee world are the worldwide logistic issues. At present, buyers are trying to cover delayed supply from minimal container availability and lower number of shipping allocations available. Globally we are seeing increased freight costs, container shortages and ships struggling to be scheduled, as well as cancelled scheduled slots, all contributing to the issue. World-wide, shipping reliability has decreased to 38.8% on time arrivals, down from 74.8% on time in May 2020.
How can we help?
Here at LCM we place significant importance on supporting our partnered local producers and farmers. Inevitably, the decrease in production will lead to the coffee prices to continue to rise, for the sustainability of the industry. LCM will continue to provide updates on the ongoing situation and can offer our customers alternative options to maintain supply. We encourage all customers to reach out to your account manager for further information or to secure stock.