The Top 3 Market Trends from 2022
2022 is finally in the books, but what have we learnt from it? A year marked by strong uncertainty and extreme price swings, here’s the top 3 trends from 2022:
Macroeconomics matter! The Ukraine war, the energy crisis, the global recession have created uncertainty in all markets sparking extreme volatility across all commodities.
Coffee wins during economic recession. Despite fears, coffee is a staple consumer product whose demand and consumption remain relatively stable during times of crisis.
High cost of production and labor shortages. In the post COVID-19 era, coffee has become more expensive to produce. Labor shortages of farm workers, especially in Latin America, continue to pose challenges to production targets.
Anything we missed from this list? Share your thoughts with us in the comment section.
Macroeconomics matter!
2022 has been marked but the Russian invasion of Ukraine, with political and economic ramifications that touched on all aspects of the world economy, coffee included. The global outlook created uncertainty and great volatility. Coffee prices peaked at $2.50/lb to crash a few months later to $1.50/lb. With such price swings, producers and exporters are better off making the most use of contracts and price fixing mechanisms to reduce their risk exposure.
Coffee wins in recession
With the pandemic first and the Ukraine war later, recession has found fertile ground lately! Luckily we are reminded over and over again that coffee demand & consumption does not suffer during recession. In contrast, consumers (and therefore roasters) look to reliable, convenient, often sustainable, coffee solutions. For producers and exporters this means investing in good (and repeatable) quality, on-time logistics, excellent customer service & good brand storytelling. These qualities will continue to be the #1 criteria for importers & roasters to continue doing business at origin.
High cost of production and labour shortages
Coffee wins in recessions, but it does not mean it has become cheaper to produce. Quite the contrary! All origins, from Colombia to Indonesia experienced high local cherry prices. High fertilizer costs, high gas prices definitely contributed. And yet it is labour shortages the most talked about issue, especially in Latin America. Border closures, heavy migration fluxes mean that there are simply not enough hands to pick cherries during harvest time. Producers and exporters will have to continue finding ways to incentize the coffee production sector in the countries, and offer tangible economic benefits to farm workers. With all this in mind, who is still surprised about high prices and high differentials at origin???
What’s in store for 2023?
The new year will bring new challenges so it is important to highlight factors that will surely impact price movements in the coming months:
Brazil should always stay top of mind. Will the 2022/23 crop be a record-breaking harvest, or will it fall short of expectations placed by analysts?
There are rumors that in USA and EU inflation may have already peaked. Is that so, or will inflation pick up again in 2023?
The energy crisis continues to have geopolitical and economic repercussions worldwide. Will energy prizes stabilize, and more importantly will the current geopolitical situation relax?
China has finally opened its borders after almost 3 years of rigid lockdowns. The economy is expected to recover leading (hopefully) to a much needed boost in commodity markets
Will coffee production be hampered by strong climatic phenomenons like La Niña?
In the following publications, we will unpack these topics in more depth to provide you the tools to navigate markets' story waters.
What do you think are the most important topics we should address? Share your thoughts with us!