NEW YORK: Coffee processors in the United States, the world’s largest consumer of the beverage, are reporting significant cost increases in their operations, mostly related to transportation, and expect to raise retail prices soon.
Mid-sized and smaller roasters, particularly specialty coffee companies, have been hit hardest, company executives said, but even larger companies such as Peet’s and JM Smucker Co say they are coping with higher costs.
Other US business sectors also face shipping inflation. Market intelligence provider S&P Global Platts reported that freight may have added nearly $10 billion to corporate costs on US inbound routes in the fourth quarter of 2020, a bill that could grow.
Last week, transportation backlogs helped push coffee prices to their highest in more than a year.
“We’re currently signing contracts for delivery in the summer and fall, and those prices have gone up quite a bit, about 15% increases on everything,” said Oliver Stormshak, chief executive at Olympia Coffee Roasting, based in Olympia, Washington.
“I’m trying to decide right now whether we eat the costs or restructure our pricing and raise it”, he added.
Coffee executives said higher demand for shipping services as more consumers shop online and extra safety procedures during the pandemic are increasing costs in the United States.
“There are supply constraints, not because of production, but simply hurdles brought upon us by COVID-19 and safety guidelines. It is a systemic issue,” said Jorge Cuevas, an executive at Sustainable Harvest Coffee Importers in Portland, Oregon.
“It is now more expensive than in the last five to 10 years to bring coffee to the consumer,” Cuevas said.
Coffee companies also said costs on transoceanic shipping are rising due to imbalances in the flow of containers caused by the pandemic. On some routes, demand for containers is increasing, while others are less-travelled, causing an uneven flow and raising costs.
“The container cost is a major issue in the coffee market,” said Rabobank’s analyst Carlos Mera, adding that routes from Southeast Asia to Europe and the United States are seeing higher prices due to container shortages.
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