Coffee Supply Chain

Since 2000 Germany has increased their import every year, going from under 14,000,000 bags to Just over 20,000,000 bags in 2011. Japan has stayed near 7,000,000 bags of imported coffee the past ten years. France has maintained 7,000,000 bags of coffee as well. Italy became he third largest imported of coffee by increasing its demand from 6,000,000 bags to 8,000,000 bags a year over the past ten years. (Reference 1 1) 2013 has already shown to be a peculiar year for coffee import and exports.
There has been a 60% decrease in Arabica coffee futures from the 2011 price. The 2011 price was a 14 year high for the coffee. This drop in price has resulted the cost of production to surpass the current market price. Brazil and Colombia have some of the lowest costs in production, 126 cents and 160 cents respectively, yet both countries cost of production have surpassed the market price. As of June 23rd the Lully contract price for a pound of coffee was 116. 9 cents. This has caused a lot of problems for coffee growers.
As a result of this the Brazilian government has stepped in to make an effort to help support the coffee industry of Brazil. In June Brazil granted the coffee industry a 1. 46 billion us dollar credit line. This credit line will cover the cost of storing the coffee, help buy coffee from growers as well as other expenses of the coffee industry. The government is hoping to avoid diving coffee prices even lower as a result of coffee growers continuing to sell their excess harvest. Reference 12) The large drop in coffee prices has been great for companies.

Shipments of coffee in the first half are up 20% from last year numbers. This increase in savings has translated to the largest coffee stockpiles since 2007. Cutbacks stated April 25th that their latest quarter, ending April 31st, saw an increase in operating profit go from 13. 5% to 15. 3% which was due in large part to the decrease in coffee prices. Companies are also lowering prices of coffee; Cutbacks decreased certain prices of coffee by 10%, Dunking Donuts by 6% and Kraft by 6% as well. (Reference 13)