FoodLogistics

Impact of Suez Canal Block on UK Coffee

Impact of Suez Canal Block on UK Coffee

In the midst of several global crises – the global pandemic, stock market crash, protests and riots breaking out across the world, political turmoils, and climate crisis – just to name a few – a seemingly trivial event brought one of the busiest trade and supply chains to a complete halt.

The impact of the Suez Canal blockage is predicted to reverberate on the global shipping industry and trade for months, with the financial repercussions of the event mounting up each day.

However, trade revenue isn’t the only thing predicted to go down in the following months, as experts predict that coffee supplies in the United Kingdom are to drop as a result of the Suez blockage as well.

But what has the Suez canal blockage got to do with your morning cup of coffee? Stay tuned as we break down the connection between the six-day Suez obstruction and the procurement and prices of coffee in the UK.

What Happened at the Suez Canal?

2021 Suez Canal Obstruction, as it was officially dubbed, happened on March 23, 2021, after Ever Given, one of the largest container ships in the world, buffeted by strong winds ended up wedging itself across the waterway, preventing other vessels from passing through that part of the Suez Canal.

The financial consequences of the six-day blockage of one of the world’s busiest trade routes are measured in millions of US dollars, with some sources claiming the ship held up trade valued at over $9 billion per day, an equivalent of around 12 percent of global trade.

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But the negative effects of the obstruction don’t stop there. The revenue of the Suez canal was pretty hit itself, with around £10 million lost daily. Moreover, the rerouting of ships on the alternative waterway, around the Cape of Good Hope, added additional eight days to their journey.

Besides the global shipping industry, the Egyptian economy, and countless businesses across the world, the Suez Canal obstruction impacted one unlikely victim – coffee lovers. 

Suez Canal and Coffee Shortage

The Suez waterway’s role is more eminent in the energy market than agricultural goods trade, with millions of barrels of oil and liquified natural gas passing through the canal each day. However, as only two major global robusta coffee exporters – Brazil and Ivory Coast – don’t use the Suez Canal as their shipping route, coffee supplies across the continent are bound to surge.

Funnily enough, news agency Bloomberg in fact reported that among the Ever Given’s cargo were containers carrying the type of coffee used in the production of Nescafe instant. 

Not to mention the freight on dozens of other vessels waiting for the jam at the Suez Canal to be resolved.

The Suez Blockage and Coffee Prices

Following the law of supply and demand, the lower supply affects the price of the goods to rise. Thus, it shouldn’t come as a surprise that only a few days after the waterway blockage, robusta futures in the UK surged 2.8%.

However, with the Suez Canal now unjammed and the freight market slowly but surely returning to normal, can we expect coffee supplies and prices to revert?

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Actually, not quite.

Even before the Suez waterway got obstructed, coffee procurement was up in the air, due to shipping container shortage that has disturbed the freight industry worldwide. 

Covid, Container Shortage, and Coffee

Among many issues the ongoing pandemic has brought about across different aspects of our lives, there’s also the shipping container crisis.

As Deutsche Welle reports, there are currently only two companies in the world that build and produce shipping containers – and both are located in China. Purchasing and receiving one still entails that the container is first loaded with goods and employed in shipment.

But even buying a container second-hand has become a troublesome task, as the pandemic has halted the global trade market. With the majority of ports congested due to the fact they are operating at limited capacities and with less manpower, the container loading and unloading process has been hindered. 

The Food Institute suggests that the shipping container crisis will increase coffee bean prices, though probably the rise will not be observed in the near future, at least not until pre-existing contracts are executed, as the CEO of Home Grounds, Alex Mastin, points out.

However, the container shortage issue isn’t the only aspect of the expected soar in coffee bean prices. According to industry experts, the 2021/2022 season will witness a rise in coffee costs partially due to the poor weather conditions, i.e. the severe drought affecting Brazil, the world’s largest producer of coffee for the last 150 years.

Coffee Prices and Supply Post-Suez

So, what can we expect when it comes to the procurement and costs of coffee beans? The limited supply of coffee due to the shipping container shortage and port congestions already threatened to cause a rise in coffee prices. 

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Coupled with the Brazilian droughty season, it’s very likely that in the next year’s season you will have to pay extra for your favorite coffee in the coffee shops and supermarkets. 

The Suez Canal crisis will only add up to the already shaky coffee market, with ships either spending days waiting for the jam to clear, or taking a longer route to their destination – both of which will additionally affect the heftier price tag of your preferred coffee.

Is the price surge here to stay? Well, industry experts agree that it’s too early to say. Climate change will surely have a negative impact on the coffee market, with the pandemic still halting international trade to a degree. The Suez obstruction will show its effect soon, though only temporarily, but with other factors included, we are yet to see what the future of coffee will look like.

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