After months of hyperbole and hysteria, doom and gloom, and cataclysmic predictions for an apocalyptic post Brexit future – the UK finally went to the polls in June to voice their opinion on the future of the UK, 52% chose (rightly or wrongly) to leave the European Union.
What does this mean for us at DRWakefield, our staff, our business and our partners across the world?
Well we’ve let the dust settle a little, allowed the knee-jerk reactions to play their part, and now is an appropriate time to sit back and assess what Brexit means to us.
Firstly and most noticeably for our UK based clients (certainly for anyone who has bought coffee post-Brexit from us) the price of coffee has risen. Quite dramatically in fact. This, unfortunately, is a two-fold problem. Primarily the cause of the price rise is the devaluation of the pound to levels not seen since 1981. This devaluation was an instant reaction to the exit of the EU, as currency traders and investors across the globe see the pound (and UK economy as a whole) a less stable place to invest in. Hence the selloff. As almost all coffee globally is traded in US Dollars, the relative strength of our currency against the USD is paramount to determining the domestic cost of coffee in the UK. The weaker the GBP, the more of it we need to buy goods priced in dollars. A Brazil Santos that early June cost £3000pmt will now cost £3450pmt
Secondly, and not entirely related to Brexit, is the rise in value of the NYC – the New York-based futures market for coffee – which forms the basis of pricing for almost all coffee traded. Frost fears in Brazil, coupled with supply / demand threats have contributed to the rise. Coffee has long been seen as a ‘safe’ and ‘austerity-proof’ commodity – and in troubled and volatile times such as these, coffee may appear a safer haven for investors cash. With more buyers than sellers – the value has appreciated.
What about our Team?
As many of you know, DRW is very proud to have a multicultural, multilingual globally representative team working out of our London office. This is not set to change. Whilst the Brexit vote garnered favour with many who want to restrict the free movement of people, there is no indication that this will affect anyone currently residing in the UK – and we look forward to a happy and healthy future with our current team who hail from such origins as the Ivory coast, Lithuania, France, the Philippines, Ecuador, Poland and New Zealand. Long may our multicultural traditions continue.
What about trading coffee into Europe?
On this point – for the foreseeable future it is all systems normal. While the UK population has spoken, we have not even begun the process of leaving the EU yet – which many experts estimate to take until at least January 2019 at the earliest. After that, it is well assumed that we will have negotiated trade agreements with most (if not all) EU countries by that point and trade will continue. It is too early to say if it will be “Free Trade”, and that bridge we will cross when we come to it. Our latest addition to the DRW expansion, our warehouse in Vilnius, Lithuania will continue to operate as normal servicing our Eastern European clients, and we are pleased to report volumes are growing through this important hub.
What remains important to us is that DRW will continue to flourish in these uncertain times. We have grown independently and stoically since our beginnings in 1970 and will continue to see our annual growth rise in line with our expectations. The coffee industry has faced much tougher economic and political times than these and come through stronger the other side. We see no reason why in these challenging times, things will be any different. The next two years may see some uncertainties, and plenty of market volatility – not least caused by the immediate political instability in the UK, but we will remain, as ever, the industry’s primary and dependable green bean specialty coffee merchants. This is just another challenge for us; trade will go on. Positive attitudes breed success.
All that is left to say is that we continue to appreciate your support of our business over the past 45 years, and we look forward to continuing to serve your best interests for the next 45 years and beyond with enthusiasm, passion and a strong ethical mandate as ever.