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Starbucks Seasonality Shifts as Coffee Market Stability Concerns Rise

An ongoing surge in global coffee production and exports has led to a collapse in the price of coffee. Global coffee prices in October were 23.1% below the same period a year earlier and 35.2% below the same period in 2017.

That’s led coffee trading firm Olam to call for “establishing an international price stabilisation mechanism could remedy extreme price fluctuations and provide much needed stability to the incomes of smallholder farmers“, the Financial Times reports.

There are, however, signs of a slowdown in global coffee export growth with shipments in August having fallen by 4.4% year over year after a 13.3% improvement in the prior three months, Panjiva’s analysis of ICO data shows. 

While Vietnam was the biggest drag on exports overall – it was the largest exporter and saw a 25.0% year over year drop in August – other markets including Indonesia and Uganda saw an expansion of 93.2% and 40.1% respectively.

PLENTY OF VARIETY IN GLOBAL COFFEE MARKET

ICO data shows that Brazilian exports of raw coffee fell 6.0% in August, while Panjiva’s data included processed products shows growth of 13.2% year over year in August. That follows a government push to retain some manufacturing added-value in country. By geography the expansion was led by a 48.6% surge in shipments to the U.S. while exports to the EU increased by a more moderate 10.2%.

U.S. DEMAND FOR BRAZILIAN COFFEE PERKING UP

The lion’s share of U.S. export growth has been accounted for by Neumann Gruppe’s Rothfos, whose imports of coffee climbed 140% higher year over year in August after a 48.4% improvement in the prior three months. JM Smucker meanwhile cut its shipments by 20.0% in August after a 16.9% rise in the prior three months. 

Starbucks, the largest U.S. importer of Brazilian coffee in the past 12 months, paused in its surge of purchases with a 2.8% decline in August which followed a 366% surge in the three months to July 31. The latter reflected a marked change in Starbucks’ previous seasonality of shipments, perhaps indicating it is itself trying to stabilize part of the market.

STARBUCKS CHANGES ITS COFFEE BUYING HABIT