World faces coffee deficit amid container shortage

NEW YORK • Coffee supplies in the United States are shrinking and wholesale prices are surging, with the hard-hit market bracing itself for further fallout from a global shortage of shipping containers that has upended the food trade.

Coffee stockpiles have sunk to a six-year low in the US even with Brazil's record crop, and a large drop in output after a drought in the South American country is expected to shift the world balance to a deficit in coming months just as demand rebounds.

"Everybody is feeling the pinch," said Mr Christian Wolthers, president of Wolthers Douque, an importer in Florida, who estimates that shipping costs have more than doubled from Latin America. "These bottlenecks are turning into a container nightmare."

While cargo market disruptions have played havoc with the global food trade generally, the problems in the coffee market show that food inflation, already on the rise, could be exacerbated as economies reopen. For now, roasters are able to draw on inventories rather than raise prices, but with stockpiles sliding and a smaller Brazilian crop coming, the strains are expected to persist.

Arabica coffee futures in New York have risen about 24 per cent since the end of October, following the damage to Brazilian groves. Last month, American green, unroasted bean inventory slid 8.3 per cent from a year earlier to the smallest since 2015, according to industry data on Monday.

The lower inventories mean there is less of a buffer to cushion the expected decline in Brazil's crop, aggravating market tightness and lending continued support to prices, analysts say.

Marex Spectron this month increased its estimate for a global coffee deficit to 10.7 million bags in 2021-2022, compared with its previous projection of eight million bags, citing lower Brazilian arabica output after adverse weather damaged crops.

In the facilities of Dinamo, one of Brazil's largest coffee warehouse operators, there is a lot of product stuck waiting for containers. In the company's unit in Machado municipality, in the coffee heartland of Minas Gerais, beans are awaiting the arrival of 18 empty containers, said Mr Luiz Alberto Azevedo Levy, a company director. "These containers will probably take about 15 more days to get here amid bottlenecks at the port."

The situation, which got even more dire this month, will probably reduce the volume of coffee exported by Brazil, Mr Levy said.

"Logistics have been a headache, dealing with lack of space and containers," said Mr Marco Figueiredo, trader and partner at Florida-based Ally Coffee, a speciality coffee merchant that imports beans from countries including Colombia, Guatemala and Brazil. "We are monitoring the situation and talking to clients, making them aware of the rising costs."

Denmark's AP Moller-Maersk, the world's largest shipping company, said containers and charter vessels are temporarily unavailable for purchase or lease, increasing congestion and leading to delays at ports. The company has tried to buy or rent all available containers, and is keeping ageing units in operation. It is also repairing containers that it usually would not at higher costs, Maersk said in a response to Bloomberg.

"This is a temporary situation, both in terms of purchasing patterns and availability of vessels," the company said. "We expect things to return to normal during the first half of 2021."

For now, many merchants are trying to hold the line on price increases as they work to lure customers back to cafes and restaurants. There is steady growth in coffee, though the out-of-home segment could take two to three years to return to pre-Covid-19 levels, said Mr David Rennie, head of Nestle's coffee brands.

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