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Since the Covid-19 pandemic brought changes to the coffee market in 2020, everyone has been closely watching the development of the situation in 2021. After some time (namely in July 2021), intermediate results can be summed up. So what explains the current price of coffee and what can we expect next?
What was the situation with the coffee supplying countries during the Covid-19 epidemic?
Due to the pandemic, the coffee harvesting process has been suspended or produced a smaller volume of beans than in previous years. At the same time, the situation in the producing countries varied significantly.
In Ethiopia and Kenya, where coffee is harvested by hand, the pandemic has interrupted transport links. This means that the pickers simply could not get to the plantations. There was also a risk of not delivering the harvested berries to processing stations in time. As a result, we received not only a deficit, but also a decrease in the quality of the product due to a shift in the stages of processing coffee berries.
In the highlands of Peru, where coffee is grown and harvested, there were also problems with communication due to quarantine measures in the spring of 2021. Pickers and even farmers were forced to leave the plantations in order to be able to receive medical care and buy food. It should be reminded that Arabica beans with a mild balanced taste are grown here. It is popular in the market. The described problem again led to a shortage of supplies.
The situation is much the same in Colombia, where the bulk of the coffee berries are harvested by hand. This is done by workers from different regions and even from neighboring countries. Since workers are forced to live crowded during the coffee harvesting season, many of them preferred to be with their families during the epidemic. Others simply did not have the opportunity to come because of the closure of the borders.
The situation is slightly better in Brazil, the world's leading producer of Arabica. This is where mechanized coffee harvesting is mostly carried out. This smoothes the shortage of workers. Vietnam, one of the largest coffee suppliers in the world market, is also doing well. Coffee ripens in Vietnam in the first months of the year, so the harvest is not only harvested and prepared, but already sent to customers in large volumes. The most popular Vietnamese variety, Robusta, is often used in classic espressos. It is also used as a raw material for making instant coffee.
But even the successful assembly countries saw some drop in revenues in 2020. For example, Robusta futures lost up to several percent on the exchange. In 2021, the environment has become more favorable.
How the pandemic has affected the prices of coffee beans
During 2020, the level of demand has changed. At first, due to the self-isolation regime, coffee consumption increased significantly by the end consumer at home. Ukrainians began to massively and even panic buying coffee, along with other products. This wave was replaced by a decrease in household incomes due to the pandemic, and hence the level of coffee consumption. Demand was volatile. Since the work of the coffee exchange is based on the balance of supply and demand, in 2020 there were more fluctuations in these indicators than in previous years. The pandemic really affected the formation of prices in the market, but along with other factors. For example, the dry year in Brazil, the Colombian strike, the situation in the Suez Canal, when a ship with containers ran aground, a large jam formed, in which ships were also found that transferred Robusta to Europe.
Experts estimated the fall of the coffee market in 2020 at the level of 20-30%. Back in mid-2020, the price of coffee was low - 95-100 cents per pound. At this time, few people bought coffee in large quantities. In the second half of 2020, prices began to rise. It became possible to buy coffee at a price of 110, then 115, and then 120 cents per pound, etc. By mid-2021, a pound of coffee began selling for 165 cents. It is believed that this is far from the limit.
The pandemic has created the so-called "deferred demand". If at the beginning of the pandemic there was a decrease in demand, now the purchasing countries began to return to their usual life. In particular, coffee has gained great relevance as a procurement for public catering. This became especially noticeable on the eve of the summer season. The problem is that supply at some point may simply not cover demand. It is likely that buyers and end consumers will start buying large volumes of coffee in anticipation of a rise in prices.
What awaits us next
Today the growth rates are stable. It is expected that further coffee will be available in the price range of 160-180 cents per pound. Some forecasts suggest a rise to 200 cents per pound or more. Be that as it may, the rise in prices should not affect the end consumer until the end of the summer. This is explained by the fact that the sale of coffee is still carried out under the previous contracts. And in the fall, it is quite possible to expect a change in the numbers on price tags in stores.
From the farmers' point of view, higher prices are good because they will earn more. But the question iswhether they can grow enough coffee to cover demand. In the simplified grow-sell-consume chain, there are different participants in the process. Including cooperatives, for which it is becoming increasingly difficult to gain the volume necessary for export. In turn, roasters suffer from high prices and delivery delays.
Coffee distributors can prevent and smooth out all kinds of problems by the following measures:
- not to promise buyers of large volumes of coffee at a stable price - if they are not contracted, the price of coffee may change;
- expand the list of channels used to purchase coffee;
- if possible, do not dump prices (that is, do not sell coffee below the cost price) and do not overestimate them significantly - it is better to reflect the real situation, but to engage in artificial buildup in an already unstable environment.
It is too early to draw final conclusions. In many countries, the manifestation of the third wave of Covid-19 is expected or is already being recorded. It can also play a cruel joke on supply and demand in the market. That is, it is unpredictable to affect the turnover and prices at which you can buy coffee. In any case, the leveling of problems with the demand for coffee outside the home is expected due to its active consumption in self-isolation within households. That is, a repetition of the last year's scenario is expected, albeit in a smaller amount. The financial situation of the inhabitants of Ukraine will play an important role here. It is acceptable that they show a greater interest in alternative goods: chicory and tea. Do not forget that the cost of coffee will also be affected by the refinancing rate with the exchange rate.
What depends on us?
Of course, we cannot influence in any way the formation of prices for coffee beans in the world. But what exactly our online store coffeeynya.ua can promise you is not to artificially inflate prices, as unscrupulous sellers like to do in our market, trying to "hit the jackpot" at the time of panic in society (this was the case with masks, antiseptics, etc.) e).
In our store you can always buy coffee at the best price. Friends, thank you for being with us.
