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Coffee Prices Jump to Seven-Year Highs Due to Brazilian Frosts


Coffee Prices Jump to Seven-Year Highs Due to Brazilian Frosts

IndexBox has just published a new report: ‘World – Coffee (Green) – Market Analysis, Forecast, Size, Trends and Insights’. Here is a summary of the report’s key findings.

Global prices for coffee have skyrocketed to a seven-year high, driven by fears of a significant reduction in production in Brazil due to freezes and the depletion of global stocks. Further growth in prices for the product will be stimulated by the reduction in production in other leading supplying countries such as Honduras and Indonesia, coupled with increased freight costs. A decrease in coffee production will lead to a fall in global exports by -4% y-o-y, which could lead to local imbalances in supply and demand and drive up consumer prices in key European and American markets.

Key Trends and Insights

Due to an expected reduction in coffee stocks following the fall of production in Brazil, prices on the global coffee market have skyrocketed in the middle of the current year. Futures in Arabica on the ICE exchange in July 2021 exceeded $2 per pound for the first time in seven years.

Abnormal freezes in the Brazilian states of São-Paolo, Paraná, and Minas Gerais in July this year damaged more than 200K hectares and will affect plantation yields. As a result, coffee production according to USDA estimates may decline by -30% y-o-y to 2.2M tonnes by the end of 2021. Labor shortages related to the pandemic, logistical difficulties and the rise of freight costs are further deterring supply and stimulating the price increases.

Brazil remains the leading supplier of green coffee with 29.3% of global exports. Following that is Vietnam (17.2%), Colombia (10.3%), Honduras (5.2%) and Indonesia (3.4%). Global coffee exports will fall by -4% y-o-y to 16.6M tonnes in 2021 owing primarily to the reduction in supplies from Brazil.

According to IndexBox estimates, based on USDA data, the production of Arabica coffee in Vietnam will rise by +15% y-o-y in the current year and the production of Robusta will contract by -2% y-o-y. In Colombia, coffee production will maintain its 2020 levels. Production in Honduras and Indonesia is expected to decline by -12% y-o-y and –2% y-o-y respectively. The expected drop in global coffee production by -6% y-o-y to 9.8M tonnes amidst an increase in demand by +1% y-o-y this year will lead to a reduction in world stocks and further increases in price.

The import of green coffee into the EU should fall by -5% y-o-y up to 2.9M tonnes due to the decrease in crop fields in the primary supplier countries of Brazil and Honduras. In the U.S. a less severe drop in imports is expected – by -1% y-o-y to 4.2M tonnes since a significant part of coffee beans comes from countries with stable crop yields during the current year, such as Vietnam and Colombia. A reduction in coffee stocks can lead to imbalances of supply and demand that will threaten the growth of consumer prices for the drink in retail and food services.

Global Coffee Production

In 2020, approx. 10M tonnes of coffee (green) were produced worldwide; surging by 1.8% compared with the previous year. The total output volume increased at an average annual rate of +1.3% over the period from 2012 to 2020. In value terms, green coffee production rose markedly to $27.7B in 2020 estimated in export prices.

The countries with the highest volumes of green coffee production in 2020 were Brazil (3.1M tonnes), Viet Nam (1.7M tonnes) and Colombia (897K tonnes), with a combined 55% share of global production. These countries were followed by Indonesia, Ethiopia, Honduras, Peru, India, Uganda, Guatemala, Lao People’s Democratic Republic, Nicaragua and Mexico, which together accounted for a further 33%.

Coffee Exports by Country

After two years of growth, overseas shipments of coffee (green) decreased by -6.5% to 6.8M tonnes in 2020. In value terms, green coffee exports fell to $17.3B (IndexBox estimates) in 2020.

In 2020, Brazil (2.4M tonnes) was the largest exporter of coffee (green), mixing up 35% of total exports. It was distantly followed by Viet Nam (1,208K tonnes), Colombia (599K tonnes) and Indonesia (376K tonnes), together committing a 32% share of total exports. The following exporters – Honduras (305K tonnes), Germany (210K tonnes), India (206K tonnes), Uganda (205K tonnes), Guatemala (190K tonnes), Ethiopia (175K tonnes), Peru (172K tonnes) and Nicaragua (128K tonnes) – together made up 23% of total exports.

In value terms, Brazil ($5B) remains the largest green coffee supplier worldwide, comprising 29% of global exports. The second position in the ranking was occupied by Colombia ($2.4B), with a 14% share of global exports. It was followed by Viet Nam, with a 11% share.

In 2020, the average green coffee export price amounted to $2,531 per tonne, increasing by 4% against the previous year. From 2012 to 2020, the most notable rate of growth in terms of prices was attained by Peru, while the other global leaders experienced a decline in the export price figures.

Source: IndexBox Platform

Kerry Coffee Establishes Position in Hong Kong, Macau

Kerry Logistics will fulfill its vision of deepening its two-year partnership with illycaffè through the launch of sole distributor, Kerry Coffee Limited, which will oversee and distribute the illycaffè’s iperEspresso coffee machines, capsules, coffee beans, and more throughout Hong Kong and

“The establishment of Kerry Coffee and the consolidation of illycaffè’s full product range under the new company will enhance the cost-efficiency of the sales and distribution operation, and enable illycaffè to increase its market share and brand recognition in Hong Kong and Macau,” commented
Robert Berger, Executive Director – Fashion & Lifestyle of Kerry Logistics (Hong Kong) in response to the news.

Kerry Coffee will create a full consolidation of illycaffè’s products under a single operator, further establishing its position in the coffee market and competitor in the region, ultimately meeting increased demand in the growing coffee culture.

Additionally, Kerry Logistics confirmed it will continue its original role of providing logistics support along with sales and marketing for the global coffee company. Marketing initiatives include brand recognition and increasing market shares.

“The development also enriches Kerry Logistics’ food services business and allows greater product diversification to serve HORECA and club customers in Hong Kong and Macau,” Berger added in the release.

Source: Kerry Logistics

Starbucks, Juan Valdez in Friendly “Coffee Clash’

Los Angeles, CA – International coffee purveyors, US-based Starbucks and Colombia’s Juan Valdez, have both announced major expansion plans…in each other’s own front yard.

Starbucks has opened the doors at its first operation in Bogota, Colombia – the South American country synonymous with coffee, while Juan Valdez has countered with a new coffeehouse in Miami, Florida.

The new Bogota Starbucks is a three-floor, 2,700-square foot operation, the first of a planned chain of 50 the company plans to open throughout the country over the next five years. It will also be the only Starbucks in the world to serve exclusively only locally-sourced coffee.

Starbucks’ stores in Colombia will be operated as a joint venture with two of the company’s regional Latin American business partners, Alsea and Colcafe, a subsidiary of Grupo Nutresa, Colombia’s largest food company.

Alsea currently operates more than 520 Starbucks in Mexico, Argentina and Chile, while Colcafe worked with Starbucks to develop ‘soluble coffee’ product.

The company has heavily invested in Colombia, which serves as its primary source of arabica coffee, a mainstay of its menu.

In 2012, Starbucks opened a Farmer Support Center in Manizales, Colombia to deliver training and agronomy support to Colombian coffee farmers.

Last summer, Starbucks announced a public-private partnership with the US Agency for International Development that is investing $3 million to increase Colombian coffee yields and to enhance economic opportunities for Colombian coffee growers, according to the company’s website.

Not to be outdone, Colombia’s own Juan Valdez, the coffee brand backed by the Colombian Coffee Growers Federation (Procafecol), is expanding its footprint in Starbuck’s home turf with the opening of a new coffee house in downtown Miami, Florida.

Procafecol, which represents more than 500,000 Colombian coffee-growing families, said it will work with an unnamed Florida franchisor to open four more stores in Miami by the end of this year with an additional 60 sited throughout the state over the next five years.

The new Florida operation isn’t the Colombian company’s first attempt to build a retail chain in the US. It currently operates seven stores in New York, Washington and the Miami International Airport.

The moves by both companies underscores the nature of the ongoing competition for an upscale market that in the US alone generates $18 billion in business annually.

But, whatever the competitive dynamics of the so-called ‘coffee clash’, Juan Valdez will have a long way to go to match the clout of rival Starbucks in Florida and elsewhere.

Customer Loyalty

With 200 stores in Colombia alone, Juan Valdez has garnered a vast reservoir of customer loyalty, both in its home country and regionally.

It is heavily invested in developing Colombia’s country’s coffee industry, a bulwark of the country’s economy. Since its founding in 2003, the coffee chain has funneled more than $20 million to a national fund that supports the country’s 560,000 coffee-growing families, some of whom also own shares in the company.

Most of its 450-plus current cafes are in Latin American countries, though they span as far as South Korea and Kuwait.

There are, however, more than 400 Starbucks in Florida alone, and, while, Procafecol’s total sales are expected to reach $85 million this year, up from $74 million in 2013 and $67 million the previous year, Starbucks is projecting 2014 sales of $16.5 billion, according to reports released by both companies.

There are more than 20,500 Starbucks locations in 65 countries. In 2002, Starbucks opened its first location in Mexico. Since then, the chain has expanded into Latin America with more than 700 stores in 12 countries including Peru, Brazil, Argentina, Costa Rica, and soon, Bolivia and Panama.

Despite the David and Goliath caste to the parallel developments, Procafecol is, at least outwardly, welcoming the competition with the group’s Director of International Sales, Alejandra Londono, was quoted as saying, “There’s room in the market for us both.”