Not even Starbucks Corp. closing most of its U.S. and Canadian locations is enough to damp coffee’s rally as potential supply disruptions outweigh demand concerns.
With more governments enacting nationwide lockdowns and many people staying home, there’s growing fears that labor and logistical interruptions will curb the flow of beans.
Arabica coffee for delivery in May was up 2.8 per cent at 11:57 a.m. in New York, heading for a fifth straight gain to the highest level since early January.
Coffee is defying the global market rout fueled by the coronavirus outbreak partly amid signs that traders are encouraging consumers to secure supplies ahead of possible disruptions. Also helping are comments by the exchange that it can’t ensure the sampling and grading process will be completed in time for the expiry of May contracts.
Now possible labor disruptions -- particularly where bean picking is labor intensive such as Central America and Colombia -- are giving further price support. In recent years, Venezuelan migrants have become an important part of the Colombian workforce. Now that border has closed.
“So far things are okay, but the harvest is yet to start,” said Roberto Velez, chief executive officer at the Colombian Federation of Coffee Growers, referring to the mid-crop collected from April. “We are yet to coordinate with authorities on permission for pickers to move freely.”
Even Coffee Supplies Under Threat Amid Global Transport Woes
Brazil, the world’s top exporter of arabica beans, won’t start the 2020-21 harvest until May. Colombia is the second-largest arabica supplier, followed by Honduras.
In Honduras, exporters have special government authorization to continue operating and “are doing so” said Miguel Pon, executive director of Adecafeh, the country’s main exporter association.
“The government has extended the absolute curfew until March 29 and this week will be crucial to learn of new cases of COVID-19 and what new determinations the government will make,” he said.
Central American countries “have very little coffee,” said Ernesto Alvarez, managing director for Coex Coffee International in Miami. “I see a problem that is now getting worse. Coffee inventory is flying.”
While a Colombian presidential decree states that people involved in agricultural supply chains have free mobility, some mayors are contravening that, said Manuel Rueda, general manager of Integra Trading SAS.
“It may take some time to sort out all the details that surround this mandate,” he said, adding that the company “will try to continue operating as usual and continue to monitor how everything is evolving.”
The labor concerns aren’t restricted to farm workers. In Brazil, for example, stevedores at the giant Santos port are threatening to strike.
“As Latin American countries feel the ripple effect of the virus grow into bigger waves, our market is exposed,” said Alex Boughton, a broker at Sucden Financial in London. “Supply concerns are still prevalent, and that’s not going to go away any time soon.”