July brought with it warm temperatures in the Northern Hemisphere – with heat waves, torrential rains, and enjoyable summer evenings. But it has also brought other upsets in climate, and a significant moment in coffee-producing history. Mercanta reflects on the past month, and looks forward, remaining positive.
Frost damage to the Brazil 2022 crop has maintained headlines amongst coffee news – and has been a weighing issue at Mercanta. The damage from the low temperatures will disrupt the 2022 global supply and demand equation thus creating another deficit year. But what does it all mean? On Monday, the 26th of July, it meant commodity NYC C-market price was at US$2.15/lb. On Friday, the 30th of July (today), it meant commodity NYC C-market price dipped below US$1.80/lb.
Worldwide research and first-hand experiences of this climate upheaval from the past week have spilled into various media streams, and it would be hard to pick up the pieces of the summary. Knowing what will happen with the 2022 harvest is difficult to predict. On the one hand, will there be a dreadful supply and demand shortage next year, US$3/lb commodity market price and some manic glares, with some producer exporters in Brazil not offering any prices at all? Or will the damage (to what is expected to be another huge Brazil crop) be limited, market volatility dying down allowing prices to tranquilize? Only time will tell.
Risk Management in sourcing, a concept with which some specialty coffee roasters are unfamiliar, has come to the forefront. Logistical nightmares, customs clearance troubles, foreign exchange volatility and now the looming risk of defaulted contracts has already put ‘direct trade’ under the spotlight. Too many supply chain risk factors are piling up on top of the already taxing job of managing roasting, wholesale client sales, staff, and everyday infrastructure and client-facing issues.
Meanwhile, as the snow is falling in Santa Catarina Brazil, what else happened in the World of Specialty? July was a slow but prosperous month, with the UK booming in specialty coffee sales thanks to the increase in vaccination rates and the opening of more businesses.
Mercanta purchased some lots in the Mexico and Guatemala Cup of Excellence Auction – paying $13-$17/lb with most Cup of Excellence Auctions teetering on the high side. We are looking forward to bringing these into the warehouses and are grateful to support the hard work of these producers.
The story of logistical delays is becoming trite as we at Mercanta continue to face the struggles of late shipments, issues at ports, and backlogging of trailers within countries. Delivering a pallet of 10 origins to a roaster client inside the Arctic Circle, on the Faroe Islands or the Maldives, French Polynesia, Oman or Phoenix, the exception is now the rule – logistical issues are now expected. We hope to maintain efficiency and are working to improve the various issues involved with packing coffee into containers, placing containers on a ship, awaiting shipping, and organizing delivery from the port to the warehouse, and to our clients.
Dubai has some new arrivals soon, including coffee shipped in a refrigerated container, to see if quality preservation offsets additional costs. A portion of these coffees will be tagged with QR codes, revealing the traceability of each coffee from origin to the client. An exciting step forward in the world of traceability.
July proved to be a difficult month, and due to the various upsets, the coffee industry will continue to falter. But we are grateful for all of our partners, producers, and clients – and we shall continue coffee hunting, locating the best coffee and supporting the many coffee producers throughout the world.