Coffee Exports Show Pandemic Resilience

The coffee industry has a history of resilience in the face of economic crises. As an essential item, the demand for this beverage has remained strong, with prices even increasing in the first weeks of lockdown due to panic buying. Though, producers and retailers are dealing with many difficulties along the value chain, which has been hard-hit by lockdown measures, social distancing and reduced international trade flows. Nonetheless, coffee exports have stayed strong throughout the crisis.Rumiñahui Duchicela, owner of Ñucallacta coffee shop and retailer, says producers have many worries regarding the market conditions. “There’s always the scare of, is it going to work? Will the coffee be sold at a good price?”, but says that in spite of the challenges laying ahead it is important to know that “Coffee is a basic necessity for a lot of people, almost 30% of the population consume it. You can considered it an essential item”. So, what is the current situation for coffee exports?Coffee harvesting in South America Harvesting is one of the initial components of coffee production, but nonetheless a very important one. Countries like Brazil and Colombia - which produce 65% of the Arabica coffee in the world- are in high demand of temporary workers for bean picking. But due to mobility restrictions, coffee growers are looking to hire fewer people and harvest gradually. Fortunately for Colombia, family members and close neighbors generally harvest the coffee beans, minimizing the risk of labor shortages.Rumiñahui says that some of the coffee growers from Central America – who typically can afford irrigation - have been able to harvest early this year. But for the rest of the region, the harvest will start in April, and only afterwards “producers will be able to set bids for their products, to then continue with the threshing, sampling, packaging and shipping." He said that Ecuadorian farms could become a source of income for unemployed family members.Exports and logistics Regarding global coffee exports, there was an increase in February 2020, with 11.11 million bags shipped compared to the 10.83 million bags from February 2019. Meanwhile in March, the prices of Arabica coffee were on the rise, in spite of a decrease in shipments. As a result, Brazilian exports to Arab countries increased 20.5%, even though they exported 17.9% less.According to Rumiñahui, high quality coffee exports will likely decrease. But he thinks that, “coffee in itself is recession proof, (…) what it changes is the type of coffee being purchased." Additionally, he mentioned that he is, “securing a certain amount of grains for the next months," for his own business. But, he considers that to keep the industry going, governments will have to support retailers through loans, which has already been seen in many regions.Many importers also decided to stockpile in the early stages on the quarantine, amid fears of supply chain disruptions. For this reason, coffee futures traded in New York surged 8,8% for the month of March, increasing the prices of high quality varieties like Arabica. Though, the anticipated purchases won't last for long, and eventually importers will have to stock up once again as the lockdown measures ease.

Coffee futures traded in New York in the last 12 months (Source: CNBC)

Coffee shops moving towards e-commerce Meanwhile, in the last step of the value chain, retailers and coffee shops are increasing their online sales in more than 100%. Out of home consumption is facing many challenges at the moment, considering that a second of third wave of infections is expected. And yet, the industry remains resilient, thanks to their efforts to adapt to new market conditions.E-commerce has become a must, and businesses are incorporating new grocery items to keep being profitable. But that’s not all: companies are making many other changes to protect their staff and consumers. Social distance markers on floors and carry-out-only services are proving useful, in addition to online sales. The latter has pushed companies to work on their websites and be very active on social media.The coffee industry in South America has received a mixed blessing. Some farm owners won’t have to worry about labor shortages - unlike many other industries - but coffee shipments will be compromised by lockdown measures and other restrictions. If consumer behavior shifts towards more commercial types of coffee, the industry will have to find ways to reach the consumer while adapting to new market conditions.Read more from Farmfolio.