For those in the industry, ‘trickle-down effect’ doesn’t begin to explain the impact COVID-19 has had on the coffee supply chain.
“Tsumani is probably a more appropriate description,” observes Langdon Coffee Merchants’ Head Coffee Trader, Guy Wilson.
The near total collapse of out-of-home coffee consumption, shipping disruptions, volatile currency fluctuations, unprecedented government intervention, and dangerously high stock to sales ratios, have put the entire supply chain in perilous position.
With one third of the world’s population in some level of lockdown, cafes and roasteries have tried to adapt, pivoting towards online sales for home-brewing, where possible. For the handful of larger roasters with established relationships with supermarkets, the impact may even be positive, or at least neutral on the bottom line.
Specialty Green Coffee Importers
Unlike those dealing in commodity coffee, importers of specialty coffee are someway removed from the volatility of the coffee, or ‘C’ futures market.
In the world of speciality coffee, long standing relationships with producers and exporters enables honest negotiations based on the quality of the cup. For this reason, Guy believes speciality prices will probably remain consistent with what has been paid in past years for comparable quality.
Nonetheless, with demand flatlining over just a couple of weeks, and warehouses full with 2019-20 harvest, speciality green bean importers are faced with the prospect of managing long term knock-on effects way beyond any successful ‘flattening of the curve’.
A green bean’s lifespan depends on its quality, how it’s been processed, dried, handled and stored,” explains Guy.
Equipped with state of the art, temperature-controlled warehousing at their Melbourne headquarters, Guy believes Langdon’s optimal storage conditions will offer advantage, but admits it is still difficult to sell green coffee after an extended period in warehouse.
Coffee ageing as delays compound
The issue is further compounded by the potential closure of ports, effectively bringing the supply chain to a grinding halt.
“If a ship or container is detained at port, the risk of coffee ageing only increases as the lower altitude, heat and higher levels of humidity conspire to have detrimental impacts on coffee vitality and flavour ” says Guy.
Add to transport woes, unprecedented lockdown measures mean workers are unable or unwilling to cross borders. This could result in coffee berries rotting before they are picked, or the overall crop deteriorating on the bush before it can be fully harvested.
Nervousness on the part of importers and roasters to buy can quickly turn catastrophic for producers who hold all the risk.
Karl Wienhold, Founder of Cedro Alto Coffee, a small-hold Colombian collective that works exclusively with LCM in Australia, explains: “Through drought, storms, worker migration issues and scarcity of resources, coffee growers work all year to grow and process a crop that can only be sold during a very short window.”
Cash flow strangled
Another effect of all this supply chain stagnation is of course delayed payments and with the majority of buyers and importers suspending purchases for now, producers are right to be fearful.
“Most coffee producers live from harvest to harvest,” says Karl, “So the true cost of the COVID-19 could reverberate for years to come, as producers are unable to meet not only their immediate but future production costs.”
Community response needed to support at-risk producers
With no clear end to the crisis in sight, the only real solution is to encourage consumers to keep buying and enjoying coffee responsibly at home.
“We are in this together,” says Guy: “A supply chain in which producers are devastated, is not worth imagining. Without our growers at origins, exporters, importers, roasters and cafés cannot exist”.
Guy advises that all buyers in the supply chain should be straightforward and transparent with their suppliers: “Be upfront, share your business forecasts and talk openly about quantities. This way producers and importers can seek other options as early as possible.”
Roasters can play a vital role too: “When roasters see an increase in premium or specialty coffee sales due to diversified home consumption, they should consider offering price premiums to producers.”
After all, one of the greatest joys of being involved in the coffee industry is its power to bring people together: From first date lattes, to cupping with growers at origin, coffee is community.
See more from Karl Wienhold, Cedro Alto, in his lockdown conversation with LCM’s Matt Randell here.