Recently we have been observing an upward shift in the price of coffee, which has affected importers, roasters and coffee shops around the world. Today we want to go into detail about the causes and what an expert within Dinámica thinks on this subject.
Main factors driving high prices:
Supply - demand effect
Climate changes:
Frost in Brazil and then a prolonged drought
Heavy rains in Colombia
Logistics problems
Speculation
The Perfect Storm
At Q3 2021, rumors of a possible frost in Brazil began to circulate the coffee market driving the prices higher, in late July 2021 the frost hit Brazil main arabica producing areas driving prices higher, yet the worst case scenario that was forecasted didn't happen and the market dropped fast. However this time was different because behind all the frost news covered a bigger problem; climate change was orchestrating a major play, a drought in Brazil and heavy rains in Colombia.
What goes best with a cup of coffee? Another cup of coffee
A crippled supply by climate change on main arabica producing countries, terrible logistics issues and aggressive US Economic recovery demanding for coffee and of course the usual chaos-speculators sparked a massive bullish rally to current market levels.
Hope for the best prepare for the worst
Talking with Gino Roverssi in more detail on the subject, he mentions that a bullish market might still continue for all of 2022. Main drivers of rising prices still are in play.
Climate Change
Crippled Logistics
US economy expects a great year, sparking demand
Rumors of defaults in main producing countries
Global Inflation
Buyers should have a clear supply plan to be able to navigate in these turbulent waters; we might see a surprise above current market levels.
To end this topic we want to mention that the future of the market is unpredictable but we will be trying to keep you up to date with expert opinions on a frequent basis. Always plan ahead and react quickly to avoid being hit by sharp swings in coffee prices.
By: Andres Ranero
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