Macro Green Coffee Market
Coffee like so many other commodities are facing a very volatile environment which is the best way to describe the current green coffee market as we turn the calendar to August 2021. As the worst of the pandemic has hopefully passed our industry, we are now faced with the realities of the environment in the growing region. Brazil, the largest coffee growing region has suffered from significant drought, followed by frost which has affected high quality Arabica coffee and has resulted in a dramatic escalation in price to purchase contracts in the near future. While work on the ground is being done to see the impact of the damage caused by these adverse weather conditions, supply of coffee will continue to be an issue. If the drought continues into September and October it will further damage the crops pushing the market higher. Higher prices will cure the deficits with potentially lower world consumption and reduction of any coffees leftover at origin. These higher prices will also bring increased production and growth of future coffee. With the current high prices, all origins will maximize the production at farms thus increasing the supply in the longer term. Projections for next year crop will continuously be revised upward from other origins as they take advantage of the higher price.
In November 2019, I was in Colombia visiting some of our coffee partners and I was once again reminded of the difficulty to grow, pick, and transport high quality Arabica coffee. Producing good coffee is quite challenging as it picked on high mountainsides, transported over very rough roads, eventually moving through to port and ultimately arriving in Canada for roasters to bring out the best in the beans and then distributed to consumers to enjoy. In many growing communities, I saw farmers collectively working together to help each other, whether it be picking or the sharing of equipment to ensure that everyone had a livelihood for their families. I was encouraged by the care and community that was shared of one another and their crops. Through the current pandemic, I often reflected on how hard it would have been for these communities to work together in the same fashion. While our country has been very fortunate to have access to vaccines and are encouraged by starting to recover our businesses, other countries are still suffering tremendous strain from this pandemic. As a result, the coffee market will remain highly volatile over the short term.
“Everything negative - pressure, challenges, are all an opportunity for me to rise.” Kobe Bryant
Let’s take this opportunity to communicate to our customers and create new opportunities in our market for our industry. We can do this by having clear and regular conversations with our customers about the drastic changes in the macro green coffee market, and then localizing those changes within our own markets that we participate in. We all want to move past this pandemic, to more stable market conditions and get back to a more regular business environment. I believe this will happen soon, but there will continue to be adversity and change in our market that we will have to address. Our customers want more than ever to hear the stories from source bringing the farm to the cup and have a desire for a more thorough understand of the coffee market. This will only make them more knowledgeable and understanding of the broader coffee market.