Coffee Farmers to Enjoy Spiked Prices as the Pandemic Increases Demand and Hoarding
Coffee Futures in the New York market rose by 8.8% in March. This is in correlation to the increased Arabica coffee prices. More consumers and countries continue to hoard supplies over concerns about its availability amidst the global Coronavirus lockdown measures.
The International Coffee Organization (ICO) made these remarks. They added that the globally enforced lockdown measures have resulted in the worldwide disruption of the food supply chain. As a result, many countries have started to hoard their supplies as consumers also stock. This is giving coffee prices a rare boost, which is especially rewarding to coffee farmers.
”Disruptions to the supply chain both in shipping and harvesting could lead to temporary shortages in the supply, putting upward pressure on prices in the short term.”
In Brazil, the world largest Arabica coffee producer, prices rose by 10% in March compared to prices in February. Meanwhile, in the New York Market, an 8.8% increase in prices saw the price rise from $1.16 a pound to its highest value of $1.212 at the time of press.
Current Demand for Coffee Is Estimated To Exceed Production
The Coronavirus has touched all aspects of the global economy, and the disruption in the food supply chain has affected all stages of food production, including manufacturing, food delivery, wholesale and retail.
In Colombia, another major coffee producer and exporter, the ICO, said shipments could be disrupted especially with disruptions in its annual harvest time which occurs in April.
The Colombian Government plans to enforce lockdown measures until the end of April. This will also keep migrant workers in the coffee production industry out of the country.
As early as the last week of March, the Food and Agriculture Organization of the United Nations had stated that the world risks a “looming food crisis,” and it is clear that coffee is no exception.
“Any restriction of movement, including the workforce, will affect the stability of food production. The situation has now been exacerbated by the global increase in demand for food,” stated Abdul Halim Saim, President of the ASEAN Food and Beverage Alliance.
Countries Are Resulting To Food Protectionism to Preserve Enough for Their Citizens
The United Nations warned that the global pandemic and resulting lockdown measures are forcing governments to prioritize their citizens’ food security.
“Some countries could resort to trade restrictions or aggressive stockpiling in a bid to safeguard food security, which could quickly escalate and support grain and oilseed prices.” Said Fitch Solutions in a March publication.
Citizens and their governments have now resulted in panic buying and stockpiling different food supplies, including coffee. Economic news also indicates that while others are hoarding by avoiding or restricting exportation, other countries with the largest consumer-base are importing more and significantly pushing purchases forward.
The Assistant Commodities Economist at Capital Economics, Samuel Burman stated that this is happening but at an unclear magnitude.
“There is some evidence that countries are bringing forward coffee purchases in anticipation of future supply disruption.”
A report by Reuters also supported this statement by stating that importers are also buying coffee in bulk. Speaking as the head of one of the major coffee exporters in Brazil, Carlos De Valdenebro said:
“We had requests from buyers in all major countries, the U.S., Japan, and Germany. Basically, all the roasters in the world. They want to have the beans there quicker, just in case.”
In London, traders stated they are unable to fulfill some of the orders due to high demand.
“Roasters and traders are stockpiling up because they anticipate supply disruption.”
The Coffee Boom Will Be Temporary
Farmers are getting their best returns from coffee production since 2016. Prices have been dropping continuously since then by as much as 30%, according to the ICO. Until March, 25 million coffee farmers around the world had been struggling to keep up with operating costs. This is a result of continuously rising prices.
The new shift, which is good for the economy, is however predicted to be temporary. Prices will start to go down when people stop buying as much and start to go through their hoarded supplies.
“Following an initial spike, there will be proportionally less demand in the coming weeks and months as consumers draw down stocks kept at home.” Said the ICO.
Another key factor that will threaten future supply is the locust invasion in East Africa, another major coffee exporter. It will affect coffee harvests as well as other crops.
