The logistics of the international coffee sector have always been difficult to negotiate, but over the last couple of years, some of these challenges have increased dramatically.
Alongside the restrictions posed by the pandemic, shipping prices are now increasing, and there is a lack of workers at various crucial stages. This has led to rising costs and delayed shipments for actors all across the sector – from traders to roasters and more.
To learn more, I spoke to two industry experts at Ally Coffee: Danilo Vitor and Ricardo Pereira. They told me about how the logistical issues in the coffee sector have affected their company and those they work closely with. Read on to learn more.
You might also like this article on coffee tasting exercises that will improve your palate.
How is coffee shipped?
After coffee has been harvested, processed, dried, milled, graded, and stored, it is then considered ready to transport.
The beans are loaded into shipping containers, transported to the port, and loaded into a container on a cargo ship.
Once these ships arrive at their destination, the containers are unloaded. The coffee then makes its way to warehouses where it waits to be sold on to roasters.
This process takes weeks to months, and throughout it, the entire supply chain relies on a number of logistics professionals.
These people orchestrate the ins and outs of everything – from container hire and shipping to road transport and loading goods – to make sure the coffee gets where it needs to on time.
So, what are the current challenges?
Danilo Vitor is the Logistics Manager at Ally Coffee, a specialty coffee importer headquartered in South Carolina, USA. He tells me that these issues have been brewing for some time – as far back as the beginning of the pandemic.
“It started at the beginning of the pandemic, when people were demanding a lot of goods,” Danilo says. “When people heard about Covid-19, people went to the supermarket and bought everything en masse, causing sales ratios to surge before businesses liquidated inventories.
“Then, industries started closing because of the virus. But, as the economy recovered and demand increased, businesses were not able to bring inventories fully back to pre-pandemic levels, causing inventory ratios to fall and a wide supply chain disruption.”
Alongside the medium and long-term effects of the pandemic, there was also the impact of Ever Given: a ship which blocked the Suez Canal for six days and halted a huge portion of global trade.
Danilo says that altogether, these factors have disrupted the status quo of the coffee supply chain.
“Logistics works in a specific way, especially for the coffee sector,” he explains. “Over the last 20 years, you could expect a shipment to arrive at a certain time, and it would.”
But Covid-19 has had another, more specific impact other than simply slowing shipment times and causing unusual spikes and falls in supply and demand.
Danilo explains that around the world, governments supported their citizens to stay at home through the pandemic to reduce the spread of Covid-19.
This meant that many workers in global logistics either stopped working or worked under restrictions which minimised their capacity to move goods.
This worker shortage is still going on, and is another obstacle to overcome if we are to repair the logistics of the coffee supply chain. For instance, Danilo says that because of a lack of drivers, containers are still left to sit at ports today.
How does this affect the coffee sector?
With a shortage of workers, spikes in demand, and related delays, the shipping containers that would regularly be in circulation are now “falling behind”. This means that they are often not available for fresh shipments of green coffee when they should be.
The difficulties in finding space to store and handle goods, which includes the shortage of readily available shipping containers, means that cargo space is becoming more and more costly.
Danilo says: “As the containers aren’t returning to their origin, this means that when you do find space on a cargo ship, there often isn’t a container available. The whole situation has meant companies have started to increase freight costs.
“Before, we used to pay US $1,600 for ocean freight from Santos, Brazil to New York, USA. Now the same route is about US $7,000 to $10,000.”
He also adds that for coffee in particular, the odds can be stacked against traders and exporters.
“Coffee is not attractive to shipping lines because it’s a heavy commodity,” Danilo explains. “It takes more fuel to move heavy stuff, which costs more money. In comparison to electronics, which are lighter, it isn’t as cost-effective for shipping companies to move our goods.”
This means that in many cases coffee producers have been unable to move their harvest out of the country. In turn, this means importers are unable to meet the regular demand for coffee they had expected.
In addition, there appear to be no alternatives. Finding other ways of transporting coffee internationally is difficult, as the cost of air freight is even more expensive than the current inflated cost of space on a cargo ship.
How have roasters and importers adapted?
Ricardo Pereira, as well as being the COO of Ally Coffee, has years of experience in the coffee industry.
In the face of shipment delays and surging logistics costs, Ricardo says the biggest change he’s seen has been with roasters choosing different coffees.
Today, with no set date for when these issues will be resolved, many are being more conservative and careful with their planning, and prioritising longevity.
“The thing is, we don’t know when this is all going to end,” Ricardo says. “So, for now, it’s all about planning, securing whatever supply you can for the near future, and hoping that this will turn around next year.
By working with importers, roasters can leverage an understanding of the global coffee trade that they don’t have. This is especially pertinent during a logistics crisis like the one we currently face.
Ricardo says that throughout these logistics issues, Ally has supported their partners by providing them with expert advice. He tells me that some of their customers were initially wary, but now they realise it was key.
“I remember when this logistics nightmare started, and we began warning some of our clients,” he says. “Some people thought that we were trying to upsell. Instead, we wanted to help them protect their business from potential shortages.”
Now that these shortages are becoming more and more commonplace, Ricardo says that much of Ally’s focus has shifted to helping roaster partners plan for the future. He says the business welcomes any coffee businesses who might be unsure of their next steps.
“It’s time for roasters to look into their needs,” he says. “Be real and don’t overcompensate. Don’t overforecast. Everyone needs to look at the demand they have for the next few months, and work together with their importers to understand their needs.
“Ask questions like: ‘what do I need to cover my bases for the next six months to a year?’ We’re always working with people asking things like that. Our focus is on doing what roasters need and taking care of them during this challenging time.”
Looking ahead at logistics in 2022
The Covid-19 pandemic has sent ripples through the global coffee sector, and some of its medium and long-term effects are still only starting to emerge.
Logistics issues seem to be here to stay for at least the next few months, which means more difficulties for roasters and green coffee buyers to navigate.
“Specialists in logistics and freight forwarders seem to think we won’t see any big improvement until the end of 2022,” Ricardo tells me.
Danilo, meanwhile, emphasises that there is still a long road to recovery for the logistics industry following these challenges.
He says: “Restarting the economy after a pandemic and a recession has not been and will not be simple.
“Hundreds of thousands of small and large businesses have to reopen, millions of laid-off workers have to find new employers, and manufacturers have to bring back production lines that idled during the pandemic. Such changes take time.”
Ultimately, it’s refreshing to see that this uncertainty is being met with resilience by thousands of coffee businesses around the world.
By forging strong relationships with their partners at home and overseas, roasters, coffee shops, and traders alike are all preparing for a future beyond these issues.
Found this interesting? Read our article on how Covid-19 will affect the coffee trade in the long term.
Photo credits: Ally Coffee
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