Global coffee trade has come to a virtual standstill. The reason is that traders have reduced their purchases of coffee beans to a minimum due to the steep price rise, Reuters reported.
Participants in the annual congress of the American National Coffee Association, which was held in Texas, said they were shocked by a 70% rise in ICE Arabica coffee futures. According to Renan Chueyri, CEO of Ecuadorian instant coffee producer Elcafe, this is the first time this year the company has failed to sell all the goods it was supposed to sell by March. “Normally we would have sold out by now, but so far we have sold less than 30% of the products. The sharp rise in prices is eating away at buyers' money and they don't have the means to buy the quantities they need," he explains.
The rise in coffee prices is due to a drop in production volumes in traditional coffee-growing regions, including Brazil. At the same time, according to some forecasts, Arabica prices could fall by 30% by the end of the year, as the high price of the drink holds back demand for it. In addition, a huge harvest of coffee beans is expected in Brazil next year.
The future of some coffee sellers is currently in question because of prices. For example, the CEO of one of the major coffee roasting companies in the United States told Reuters that some of his partners are not confident that they will be able to continue doing business. "They don't know if they will be able to sell their products at the new prices. "Some of them are going bankrupt," he said. Against this backdrop, he said, some U.S. coffee retailers have begun to feel a “nightmare” shortage.
According to a source in the coffee bean storage industry, warehouses near U.S. ports where beans from Central and South America arrive are currently only half full. “Some coffee storage companies are returning warehouses to their owners by terminating leases early,” he noted.
Meanwhile, according to commodities trader Louis Dreyfus, coffee prices may soon fall thanks to the expansion of coffee planting areas, including in India, Uganda, Ethiopia and Brazil. Against this backdrop, some companies in the sector expect that, combined with a bumper harvest in Brazil next year, this could lead to a collapse in coffee prices.
In January, Bloomberg reported that wholesale coffee prices had recently surpassed the all-time high set in the late 1970s, reaching USD 7.5/kg. It noted that a subsequent increase in retail prices remained a matter of days or weeks. In addition, coffee bean futures have risen by 45% in the past six months. According to Bloomberg, the situation could be worsened by the introduction of sanctions by US President Donald Trump against Colombia, the second largest supplier of coffee to the US. Overall, the price of Arabica and Robusta has more than doubled in the past 12 months.