Bitter brew for coffee roasters as Vietnam adds to Brazil woes

Bitter brew for coffee roasters as Vietnam adds to Brazil woes

Strict blockades in Vietnam, the world’s second-largest producer, have hit major coffee roasters and raised bean prices due to concerns about exports and supplies.

Vietnam is a major exporter of Robusta coffee and is a bitter bean used in instant coffee and some espresso blends. NS Rapid rise Due to Covid-19 infection and lack of vaccines, the government has imposed travel restrictions on production areas.

Rabobank analyst Carlos Mela said:

The Robusta futures benchmark reached a four-year high of $ 2,043 per ton on Friday, up almost 50% from the beginning of the year. This rise follows the rise in Arabica, which then jumped to a seven-year high in July. Unseasonable frost In Brazil, we ran into a tree that had already been weakened by the drought.

While many roasters have hedge agreements to isolate them from coffee price fluctuations, analysts have begun to downgrade the profit forecasts of some companies.

Last week, JM Smucker, the US food company behind Folgers and Dunkin’Coffee report Quarterly profit in the coffee business was down 17% year-on-year. In addition, due to “affecting major products that are important to our business” and “multiple extreme weather events,” we lowered our full-year earnings forecast by 5% from $ 8.25 to $ 8.65 per share.

Some companies, such as Starbucks, have long-term hedging contracts and do not feel the impact of rising prices in the international commodity markets. Starbucks said at the end of July that it had fixed coffee prices for the business year up to September 2021 and the following fiscal year.

However, other companies, including JMSmucker, Raised retail price To support the margins squeezed by higher coffee costs. Germany’s leading roasters Tchibo and Japan’s UCC coffee have been forced to announce higher retail prices.

JDE Peet’s, the second roaster after Nestlé and the owner of coffee brands such as Douwe Egberts and Stumptown, said earlier this month that it was “quite good hedged” with retailers on prices. I was negotiating.

Nonetheless, some analysts expect a surge in bean prices to break into the margins of the groups listed in Amsterdam. “Given the coffee inflation rate so far, it seems unlikely that JDE Pete will be able to fully recover from the effects of coffee price inflation in 2022,” said a Berenberg analyst.

Coffee experts are currently focusing on Brazil. The rainy season is expected to begin in early September, which is very important for coffee trees that survived last year’s drought and frost. “Rain is very important for awakening dormant trees, stimulating flowering, replenishing soil moisture and resuming leaf growth of trees that have lost their leaves due to frost,” said Ilya Byzov of coffee trader Sucafina. Said.

Rebase line chart showing Robusta prices catching up with Arabica

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