— This is the script of CNBC's news report for China's CCTV on September 27, 2021, Monday.
Coffee futures trading on CME have been down from their peak in summer, but are still 44%. And that is because all of the three biggest exporters - Brazil, Vietnam, and Colombia - are facing different kinds of a supply crunch. Brazil was hit by droughts not seen in a century and severe frosts, while Colombia experienced heavy rains, which turned into a poor harvest season. Last month, exports of green coffee from Brazil fell 27% from a year earlier. Conab, a crop forecasting agency, predicts that Brazil probably harvested 40% less arabica coffee this season than last year and the lowest amount since 2009. The loss is equivalent to about two-thirds of U.S. consumption, and Americans drink the most coffee in the world, according to the agency. And between January and August, coffee exports from Vietnam, the second-largest exporter, were 6.4% lower than a year ago. That was due to lockdown and control measures because of Covid-19.
While production has been cut, the coffee industry is also facing a logistic bottleneck, just as many other industries. Exporters association Cecafe said in a report that around 3.5 million bags of coffee could not be shipped on time this year due to a shortage of containers and other hurdles, causing losses of around $500 million to the country's coffee exports.
Rising coffee prices may have different impacts on retailers of different sizes. Larger retailers can better deal with it.
Kevin Johnson
Starbucks CEO
"Starbucks we have a coffee buying strategy that we buy our green coffee 12 to 18 months in advance. So we are already price locked for for for for more than 14 months, which means we've already purchased the green coffee that we need the Arabica coffee, you know, certainly for the rest of this fiscal year and for most of fiscal year 22 and we've got it to the warehouse so you know, not only do we have a great cost basis for that coffee, but we have a supply adequate supply. We're not going to run out of coffee and we're going to have it at a good cost. "
But, smaller coffee stores may face much bigger pressure coming from rising costs. And national retail prices of coffee have been rising. General Miller is seeing higher food inflation down the road.
In addition to the United States, major coffee importers in Europe, including Germany, Italy, and France, will also face cost pressure, which is expected to last for a while. Fitch Solutions predicts that coffee prices will be relatively high in 2022 while supply will not rebound until the harvest season of 2022/2023. At the same time, we also need to keep watching the uncertainty that the Covid-19 may bring to production and transportation in the coffee industry.