Disruptions in the global transportation of coffee, caused by container shortages and port congestion, are likely to keep coffee prices high for an extended period of time, as they make it more difficult for the market to rebalance supplies geographically.
Coffee analysts and traders said Friday at the Swiss Coffee Trade Association’s (SCTA) annual conference that transportation issues are preventing available supplies from moving quickly enough to meet demand in some parts of the world, resulting in higher coffee prices.
“When there is a global supply shortage, stock draws will be sought. Increased prices would increase transportation (of available coffee), but this is not the case “Ben Clarkson, head of Louis Dreyfus’ coffee platform, stated.
“Clearly, there is a risk of higher prices. The market is scrambling for equilibrium but has not yet discovered it “Clarkson continued.
This week, Arabica coffee prices in New York reached near a seven-year high, as the market adjusts to the prospect of reduced supply in top grower Brazil due to drought and frost.
“We believe there is a deficit of approximately four million bags, while other analysts believe it is as high as seven million bags,” said Carlos Mera, head of agri commodities market research at Rabobank, adding that exports from Brazil and other producing countries have been slow due to shipping bottlenecks.
Nhung Ly, managing director of COMCO Trading in Vietnam, said the Asian country, which is the world’s second largest coffee producer, will have a large coffee production in 2021/22, on top of already large carry-over stocks, but companies have struggled to move the coffee out of the country.
According to the experts, current high prices will eventually stimulate production in countries and regions other than Brazil, such as Colombia, Central America, and Africa, resulting in a more balanced supply, but this will take time.