- The coronavirus outbreak caused coffee prices to jump in April and coffee futures for May have gained more than 15% as of April 16, according to CNBC.
- In order to avoid shortages due to disrupted supply chains, consumers are buying coffee. Importers are responding by stockpiling coffee to have a month of inventory on hand, Reuters reported.
- However, experts cited by CNBC suggest this price increase will be short-lived if coffee shops remain closed and individuals start consuming their stockpiled supplies.
Coffee is the latest commodity where prices and accessibility have been impacted by the pandemic.
The International Coffee Organization told CNBC the increase in coffee prices is reflective of consumers' front-loading demand in order to weather predicted shortages in the future. This reaction, coupled with predictions from the ICO that coffee demand will exceed production, has caused coffee futures to surge since February.
While current prices and short-term futures paint a rosy picture for farmers that have been suffering through some of the lowest global prices in more than a decade, according to The Wall Street Journal, this reprieve is unlikely to last.
Locust invasions in East Africa have disrupted harvests. Lockdowns in Colombia are expected to temporarily disrupt coffee exports as migrant labor limitations have impacted the harvest. In Brazil, record production levels may cause container shortages in the coming months. These factors have the potential to result in a worldwide coffee shortage and higher prices.
Still, higher prices have not yet caused consumers to shy away from purchasing coffee. CNBC cited IRI data showing that coffee spending in France and Italy has risen recently. Big food companies also have invested billions recently to bulk up their coffee offerings as consumers flock to healthier beverages. Nestlé, known for brands like Nespresso, Nescafé and Taster’s Choice, paid $7.15 billion to sell Starbucks' retail products and acquired a stake in popular coffee shop chain Blue Bottle and snapped up Chameleon Cold-Brew. And in 2018, Coca-Cola spent $5.1 billion to purchase the Costa Coffee brand.
As coffee consumption grows — a 2018 survey from the National Coffee Association found 64% of American adults drink a cup of coffee each day, up 2% from 2017, and the highest level since 2012 — companies have taken notice. However, if a shortage is percolating and supply chains are unable to furnish the beans that become the caffeine consumers crave, beverage makers heavily invested in the segment could find their margins under pressure.
If supply chains can be opened and coffee can flow more freely through the market, it's likely that some of these pricing pressures can be avoided. However, feasibly accomplishing this in an environment where countries have closed borders and quarantined their citizens may be an undertaking that not even the CPG giants of the world could accomplish.