Story at a glance
- Coffee distributors report higher-than-expected cost inflation amid supply challenges.
- A drought in Brazil and COVID-19 restrictions in Vietnam are driving up prices.
- While some of the cost will be shouldered by companies, some may be passed off onto customers.
Whether you’re still working from home or back in the office, one part of your morning routine has probably remained constant: your morning coffee. But even as demand remains steady, supply challenges are driving up prices far beyond expected.
“Brazil is the largest coffee producer in the world,” Warren Patterson, ING’s head of commodities strategy, told CNN Business. “They’ve been hit with quite a bad drought this year and it’s been followed by frost.”
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The country, which has the most freshwater resources on the planet, has lost 15 percent of its surface water since 1991, reported The Associated Press, and is currently experiencing its worst drought in nearly a century.
Another major producer, Vietnam, is under strict COVID-19 restrictions as the delta variant upset its nearly successful response to COVID-19. Shipments for the second half of the year are predicted to fall by 30 percent year on year, reported the South China Morning Post.
“As we came into the fiscal year, we were anticipating mid single-digit cost inflation as a percent of our total cost of goods sold,” J.M. Smucker’s Chief Financial Officer Tucker Marshall said, according to CNN . “Now we’re seeing high single-digit cost inflation.”
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Published on Aug 31,2021