HOUSTON: Global coffee traders and roasters say they have slashed their purchases to minimal levels, as the industry reels from a steep surge in prices that suppliers have yet to convince retail stores to accept.
At the US National Coffee Association annual convention in Houston this week, attendees said they have been in shock at a 70 percent increase since November for Arabica coffee futures on the ICE exchange, the benchmark for coffee deals around the world.
Renan Chueiri, director general at ELCAFE C.A. in Ecuador, said this year is the first time the instant coffee maker hasn’t sold all of its expected annual production by March.
“We would usually be sold out by now, but so far we sold less than 30 percent of production,” he said. “The big price increase eats clients’ cash flow, they don’t have all the money to buy what they need.”
The coffee price hikes have stemmed from lower production in important coffee growing regions, particularly in top grower Brazil, reducing the availability of beans.
“Nobody wants to be exposed, nobody is buying for future delivery, it is all hand to mouth,” said one coffee broker, asking not to be identified due to the sensitivity of the issue.
By “hand to mouth,” he was referring to the practice of buying only what is necessary for the moment and eschewing stockpiling.
Many recent deals in Brazil, he said, have been conducted in a very conservative manner.
“You close a deal, and then you have seven days to go to the farm or warehouse and get your coffee. You check the quality, and if it is ok, you make the payment on the site and drive away with the coffee.”
A recent Reuters poll predicted that Arabica coffee prices could fall 30 percent by the end of the year, as high prices curb demand and early signs point to a bumper Brazilian crop next year.
But until prices drop significantly, much of the coffee industry could be in for a world of pain.
A chief executive of a major roaster in the United States — the world’s largest market for coffee consumption, said some of his clients are not sure they can continue to be in business.
“They don’t know if they will be able to sell their product at the new prices,” he said, also asking not to be identified. “Some people are going down.”
The CEO said supermarkets and grocery stores had been pushing back against the higher prices asked by roasters. Negotiations were taking a long time and some retail outlets were starting to be short of coffee on the shelves.
“It has been a nightmare,” he added.
Coffee warehouses close to ports in the US, which receive beans coming from Central and South America, currently have half their normal volumes, said an executive for one of the largest companies in the storage sector.
“Some storing companies are returning silos to the owners, canceling leasing contracts early,” he said.
Michael Von Luehrte, owner of broker MVLcoffee, said the coffee market, particularly on the trading side, could see consolidation.
Companies with more capital will be able to increase trading volumes, while others will suffer with reduced financing, he added.
Commodities trader Louis Dreyfus said in a presentation during the conference that the coffee planted area has been expanding in reaction to the higher prices.
Expansion has happened in countries such as India, Uganda, Ethiopia and Brazil. The company believes that if Brazil manages to have one big crop, then that in combination with the new planted areas could lead to a collapse in prices.
Global coffee trade grinding to a halt, hit hard by brutal prices hikes
https://arab.news/vvk8q
Global coffee trade grinding to a halt, hit hard by brutal prices hikes
- Arabica coffee futures have surged 70 percent since November
- Traders and roasters making minimal purchases
Some Warren Buffett wisdom on his last day leading Berkshire Hathaway
OMAHA, Nebraska: The advice that legendary investor Warren Buffett offered on investing and life over the years helped earn him legions of followers who eagerly read his annual letters and filled an arena in Omaha every year to listen to him at Berkshire Hathaway’s annual meetings.
Buffett’s last day as CEO is Wednesday after six decades of building up the Berkshire conglomerate. He’ll remain chairman, but Greg Abel will take over leadership.
Here’s a collection of some of Buffett’s most famous quotes from over the years:
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“Be fearful when others are greedy, and greedy when others are fearful.”
That’s how Buffett summed up his investing approach of buying out-of-favor stocks and companies when they were selling for less than he estimated they were worth.
He also urged investors to stick with industries they understand that fall within their “circle of competence” and offered this classic maxim: “Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.”
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“After they first obey all rules, I then want employees to ask themselves whether they are willing to have any contemplated act appear the next day on the front page of their local paper to be read by their spouses, children and friends with the reporting done by an informed and critical reporter.
“If they follow this test, they need not fear my other message to them: Lose money for the firm and I will be understanding; lose a shred of reputation for the firm and I will be ruthless.”
That’s the ethical standard Buffett explained to a Congressional committee in 1991 that he would apply as he cleaned up the Wall Street investment firm Salomon Brothers. He has reiterated the newspaper test many times since over the years.
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“You only find out who is swimming naked when the tide goes out.”
Many companies might do well when times are good and the economy is growing, but Buffett told investors that a crisis always reveals whether businesses are making sound decisions.
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“Who you associate with is just enormously important. Don’t expect that you’ll make every decision right on that. But you are going to have your life progress in the general direction of the people you work with, that you admire, that become your friends.”
Buffett always told young people that they should try to hang out with people who they feel are better than them because that will help improve their lives. He said that’s especially true when choosing a spouse, which might be the most important decision in life.
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“Our unwavering conclusion: never bet against America.”
Buffett has always remained steadfast in his belief in the American capitalist system. He wrote in 2021 that “there has been no incubator for unleashing human potential like America. Despite some severe interruptions, our country’s economic progress has been breathtaking.”
