As Vietnam intensifies Brazil’s woes, coffee roasters bitterly brew

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Agricultural products update

Due to concerns about export supplies, the strict blockade in Vietnam, the world’s second largest grower, has caused the price of coffee beans to rise, and leading coffee roasters have been hit.

Vietnam is a major exporter of Robusta coffee, a bitter coffee bean used in blends of instant coffee and some espresso.this grow rapidly The Covid-19 infection and vaccine shortage have led the government to impose travel restrictions on production areas.

“People are very worried that you might not be able to ship your coffee abroad,” said Carlos Mela, an analyst at Rabobank.

The Robusta futures benchmark hit a four-year high of US$2,043 per ton on Friday, up nearly 50% since the beginning of the year. After Arabica coffee jumped to a seven-year high in July, Non-seasonal frost In Brazil, the trees have been weakened by drought.

Although many roasters have signed hedging agreements to protect them from coffee price fluctuations, analysts have begun to lower their profit forecasts for some companies.

Last week, the American food company JM Smucker behind Folgers and Dunkin’ coffee Report The quarterly profit of its coffee business is down 17% from a year ago. It also lowered its full-year earnings guidance by 5% to US$8.25-8.65 per share, partly due to “multiple extreme weather events” that “affected key commodities that are important to our business”.

Some companies, such as Starbucks, have long-term hedging contracts and will not feel the impact of rising prices in the international commodity market. At the end of July, Starbucks stated that it had locked in its coffee prices for the business year ending September 2021 and the next fiscal year.

However, other companies including JM Smucker have Increased their retail price To support the profit squeezed due to rising coffee costs. Leading roasters and retailers, Germany’s Tchibo and Japan’s UCC Coffee, were forced to announce retail price increases.

JDE Peet’s, the second-largest roaster after Nestlé and the owner of coffee brands such as Douwe Egberts and Stumptown, said earlier this month that it has “had a good hedging” and is currently negotiating with retailers. Prices are negotiated.

Nevertheless, some analysts expect the sharp rise in soybean prices to erode the profit margins of the Amsterdam-listed group. “Given the coffee inflation rate so far this year, we believe that JDE Peet’s is unlikely to fully recover the impact of coffee price inflation in fiscal year 2022,” Berenberg analysts said, and they lowered their earnings expectations.

Coffee experts are now focusing on Brazil. The rainy season is expected to begin in early September, which is crucial for the coffee trees that survived last year’s drought and frost. Ilya Byzov of coffee trader Sucafina said: “In order to wake up dormant trees and stimulate flowering, replenish soil moisture and restart the leaf growth of trees that have fallen due to frost, rainfall will be very important.”

Repositioned line chart shows that Robusta prices catch up with Arabica coffee

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