"It's Systemic" - Coffee Consumers Face Soaring Prices As Shipping Costs Surge

Shipping bottlenecks created by the pandemic have disrupted global supply chains. There's currently an imbalance of shipping containers around the world that has resulted in steep transportation costs. The latest to complain about sharp shipping inflation are US coffee processors who warn retail prices may have to rise, according to Reuters

Coffee processors of all sizes are alarmed about higher freight costs. Mid-sized and smaller roasters could be hit the hardest. Even large firms like Peet's (PEET) and J.M. Smucker Co (SJM) said they are battling with rising costs. 

"'There are supply constraints, not because of production, but simply hurdles brought upon us by COVID-19 and safety guidelines. It is a systemic issue,' said Jorge Cuevas, an executive at Sustainable Harvest Coffee Importers in Portland, Oregon.

"'It is now more expensive than in the last five to 10 years to bring coffee to the consumer,' Cuevas said.

Coffee companies pointed to transoceanic shipping disruptions, such as the container shortage, something we first noted last September that pointed out demand for ocean freight out of China was "leading to equipment shortages in Asia." This caused a lopsided trade balance with the East as products from China rushed to the US while containers piled up in Western countries with very few products sent back, resulting in shipping delays and surging container costs. 

"The container cost is a major issue in the coffee market," said Rabobank's analyst Carlos Mera. He said routes from Southeast Asia to Europe and the US are experiencing higher shipping costs because of the shortage. "Even if you are willing to pay, you may not find availability," Mera warned. 

Raw commodities such as coffee, cocoa, cotton, and refined sugar are generally shipped via shipping containers, while corn, beans, and raw sugar are hauled in bulk carriers. 

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