Coffee Supply Chain Nightmare

The price of coffee has gone up a bit on the NYMEX due to a predicted shortfall in Brazil’s coffee crop. But, the price that you pay for coffee is going up even more due to a coffee supply chain nightmare that is affecting global shipping on all goods. Bloomberg writes about freight snags driving shipping rates to astronomical levels. Coffee inventories in the USA are down and going lower as a global shipping container shortage has affected virtually all shipments of food and beverages.

Coffee Stockpiles in USA at a Six-Year Low

Coffee wholesalers in the USA are selling their reserve inventory. As the global supply chain disruption continues there is little hope for an early replenishment of coffee supplies. As the law of supply and demand asserts itself, US wholesale and resale prices are rising in excess of what would have been caused by the drought and reduced coffee crop in Brazil, the biggest producer and exporter. Meanwhile, demand for coffee has gone back up which, in turn, has served to drive prices higher.

Demonstrations Tie Up Coffee Shipping from Colombian Ports

Colombia dealt with the early stages of the Covid-19 pandemic by ordering a virtual shutdown of society. To make sure that people did not starve to death the government delivered food door to door in the barrios. The combination of spending by the government and reduced tax income because of businesses shutting down has hurt Colombia’s credit rating and driven the peso to all-time lows. In an attempt to get back to a positive fiscal balance the government promoted measures like reducing the already-low monthly minimum wage and putting taxes on foodstuffs like rice and beans. The result was months of street demonstrations and blockage of major highways both of which slowed commerce to a virtual halt. The demonstrations spread to the two major ports of Cartagena on the Caribbean and Buenaventura on the Pacific. Thus, Colombia has shipping issues in excess of the shortage of shipping containers and global supply chain slowdown.

Coffee Supply Chain Nightmare

Coffee Shipping Costs

The cost of the cup of coffee you drink at breakfast or pick up from your favorite coffee shop on the way to work is driven by the cost of the green coffee beans at the source, shipping costs to the roaster, roasting and roaster profit, and retailer or coffee shop markup. Inflation is asserting itself as the economy comes out of the Covid recession so prices are up across the board. But, right now, the biggest uptick in prices is coming from the cost of shipping your coffee from anywhere in the coffee belt to warehouses in the USA, Europe, Japan, and everywhere else where coffee is consumed. At this moment the movement of shipping containers across the world has hit numerous bottlenecks and that has made timely shipping or shipping at all impossible from some locations. While there are around six million shipping containers in transit across the world at any given time, there are not enough in the right places and at the right times to keep prices down and keep the coffee supply chain from the current nightmare.

Coffee shipping costs have doubled and tripled in some instances. At Buy Organic Coffee we continue to provide coffee direct from Colombia albeit at a higher cost, not because the coffee farmer charges more but because of supply chain problems.

Coffee Supply Chain Nightmare – Slideshare Version



Leave a Reply