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  • maupc7
    • Jul 30, 2021
    • 3 min read

Industry update: Brazil and Colombia under pressure

Have you ever thought about a world without coffee? That would be tragic, but the recent events in Brazil and Colombia rise the red flags for all the stakeholders in the supply chain. Climate change affecting the production of one of the biggest exporters in world with yet unmeasurable damages, and skyrocketing logistic cost in Colombia are putting a lot of pressure in the prices of the coffee for different qualities. How can we this affect you as a producer? Let's review what's more relevant in the industry this month and discuss about it


Brazilian winter. Frost destroying crops


Two of the biggest producing areas (Sao Paolo and Minas Gerais) in Brazil have been affected by low temperatures below 0 degrees destroying part of the harvest and crops. Different reports highlight the severity of the damages that are yet unknown because the damages can only be measure in the next months when specialist can determine if the plants have died or severely damaged, and when the flower start to sprout and bloom as Jonas Ferrasco writes for Daily Coffee News. .


Coffee plant affected by frost in Brazil.

Source: Daily Coffee News and Jonas Ferrasco.


We want to recommend you two articles about this to further read about this issue and open the discussion of how this will affect the industry (see references). Immediate effects, we can think about this increasing the prices per pound for Brazilian coffee as it is explained in PerfectDailyGrind when last Monday July 26th it reached US $2 per pound (the highest since October 2014). We can only wait for more information in this regard and keep looking at the prices for a better analysis.


Social uprising in Colombia.


The protest in different regions in Colombia, blockades in the road and ports lasted for over two months and the effects within the country continue affecting export companies, deliveries and customers wolrdwide. A combination of different issues affecting the population (socioeconomic conditions, inequality, political discrepancies over the peace treaties) made diffferent sectors to rise up and take the streets asking for a change. Besides the social strikes, there were other actions taken by several social organization such as blocking roads and port with a major affection in the exports, including thief and vandalism.

Source: AP News.


Again, the effects of this situation are going towards the prices of coffee increasing with records over the futures prices and differentials in Colombia spiking the prices up to 1.44 per pound in April.

Logistic challenges


On top of this, different situations related to sea freight are skyrocketing the prices of transportation. Let's recall the Suez Canal months ago, and the preventive measures for COVID-19 taken in China in the biggest port of the world are now pilling up containers that will take months to clear up and to stabilize the situation. We have reports of prices for sea freight over ten thousand US dollars from South America to China and other destinations.

How can this affect you?


We would like to know your opinion. But, let's narrow the scope to specialty coffee and generate a discussion. Will higher market prices and future prices make a difference in our sector? We believe it will influence on the prices specially because producers might be motivated to sell their cherries at the market prices, reducing the offer of specialty coffee lots. However, different stakeholders are under pressure (long-term contracts, buyers and traders) who might stop buying in order to protect their interests can destabilize the market let producers with an full warehouse of unsold coffee. .


Please, let a comment on Instagram or this website with your thoughts. We understand the positive or negative standpoint comes from the eye of the beholder. Some will benefit in the back of others. We will wait for your feedback while drinking coffee.



References:


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