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Shipping disruptions to keep coffee prices high for longer, say experts By Reuters


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© Reuters. FILEPHOTO: Dan Streetman (Vice President of Wholesale and Coffee Buyer for Irving Farm Coffee Roasters) holds a few La Bendicion coffee beans from Nicaragua on September 23rd, 2014. REUTERS/Carlo Alle

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By Marcelo Teixeira

NEW YORK, (Reuters) – Coffee prices will remain high due to disruptions in coffee transportation around the globe, such as container shortages or port congestion. This is because it makes it harder for the market geographically to rebalance its supplies.

Coffee traders and analysts stated that transport problems have prevented available supply from moving fast enough to meet the demand in certain areas around the globe, which has boosted prices.

You will seek stock draws when there is a global shortage. According to Ben Clarkson (head of Louis Dreyfus’ coffee platform), high prices could increase transport costs. But that’s not what is happening.

There are clear risks that prices will rise. Clarkson said that the market was looking for an equilibrium, but it hasn’t found one yet.

New York’s Arabica coffee market prices were close to their highest level in seven years, due to the fact that the market is dealing with the prospect of reduced supplies in Brazil (the top-grower) after the drought and frosts.

Carlos Mera from Rabobank is head of the agri commodities markets research. Mera said, “We believe that there’s around four million bags in deficit, but other analysts consider it to be seven million.” He added that because of shipping bottlenecks, exports from Brazil, and other countries, have been slow.

Nhung Ly is the managing director of COMCO Trading in Vietnam. He said that Vietnam, which produces the second largest coffee in the world, will produce a lot of coffee in 2021/22 in addition to its large carryover stock. However, companies are struggling to get the coffee out.

Experts believe that the current high prices will soon boost production in other countries, like Brazil. This will result in a better supply balance, though it will take some time.

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Mike Robinson
Mike covers the financial, utilities and biotechnology sectors for Street Register. He has been writing about investment and personal finance topics for almost 12 years. Mike has an MBA in Finance from Wake Forest University.