A worldwide coffee shortage stemming from multi-pronged supply chain disruptions has caused the price of wholesale coffee to surge, Bloomberg News reported on March 23.
A large production drop in Brazil caused by an ongoing drought and intense competition for steel shipping containers are contributing to these strains.
“Everybody is feeling the pinch,” Christian Wolthers, the president of Wolthers Douque, a coffee importer in Fort Lauderdale, Florida, told Bloomberg. “These bottlenecks are turning into a container nightmare.”
China played a significant role in this disarray. The country’s economic recovery from COVID-19 has been quicker than the rest of the world, allowing the nation to ramp up its export economy and pay larger premiums for shipping containers. With this, it can make large sums of money by sending empty containers back to cargo handlers.
Typically, empty shipping containers are backfilled with supply in both directions of a voyage. But the cost of carrying goods from China to the U.S. is almost 10 times higher than the opposite journey, which incentivizes liners to favor empty boxes instead of loading them. All told, food and commodities buyers are waiting longer periods for their goods while others have halted purchases altogether, leading to shortages everywhere, especially with the current coffee supply.
Bloomberg industry data showed American unroasted bean inventory slid 8.3% last month from a year earlier to the smallest since 2015. Marex Spectron, a UK-based liquidity firm that provides indicators on global energy, metals, agricultural, and financial markets, raised its coffee deficit estimate to 10.7 million bags from 8 million for 2021 to 2022.
As COVID regulations slowly loosen and people return to coffee shops and restaurants, merchants face the challenge of luring back customers while shielding them from the burden of increased prices of the caffeinated bean.
The container crunch seen in recent months does not just fall on coffee. It has spanned into other goods, including soybeans and grains.
For now, coffee prices from prevailing shipping contracts are unaffected because such orders were placed before supply disruptions. However, all players in the process – from warehouse managers to coffee drinkers – may feel the brunt of the coffee shortage soon.
