Coffee has always been relatively challenging to source and convey to market. The last 18 months have provided additional logistical complexities due to the pandemic, augmenting shipping time frames from almost every origin. Lack of equipment (containers) and vessels to cater for global trade demands has meant that coffee contracts have been delayed, sitting in supplier/ exporters warehouses, or origin ports and transhipment hubs. In addition to the difficulties in global coffee logistics, we have seen the prices of coffee increase dramatically, the main causation being the recent frost in Brazil.
While the full impact of the Brazil frost is still a little in question, recent generous rainfall locally is expected to help mitigate dry soil conditions and optimise the cherry setting and development for next year’s harvest 22/23 after the flowering period was triggered last month with the onset of the rainy season.
LCM’s General Manager Guy Wilson explains, “the rain has provided some upside risk mitigation for a situation that could have been much worse, while damage caused by the frost is acknowledged we are just waiting now for accurate projected crop impact figures to be quantified by the industry. Prices are not going to return to levels we have seen in the last few years”. The Brazil harvest and its implications for global coffee prices still has a little to play out.
The price of green coffee in relative AUD terms in the last 6 months has increased by AUD$3 p/kg.
Could we see coffee prices rise further? It is a watch and see situation. New fundamental pricing influences include tensions in Ethiopia with escalating civil unrest that could impact local coffee crop movement and distribution. Furthermore, we have recently become aware of weather-related anomalies impacting the current Indian harvest. Early reporting suggests a potential 30% (Arabica) and 20% (Robusta) crop yield loss. We need everything to going right in terms of origin production, any further negative news will only lend fuel to already jittery coffee market. The only mitigation to rising prices could come in the form of flat demand from North America and Europe due to renewed COVID variant concerns. Strap yourselves in, we are in for a wild ride…
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