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Coffee Blight Threatens Latin American Farmers

By APICS staff | 14 | 10 | May 20, 2014

A fungus known as coffee rust so far has caused more than $1 billion in damage across Latin America, affecting yields of the Arabica coffee bean, which is used in most high-end and specialty coffees. Now, the US government is increasing efforts to help farmers fight the disease, the Associated Press reports.

“We are concerned because we know coffee rust is already causing massive amounts of devastation,” says Raj Shah, head of the US Agency for International Development. His organization is beginning a $5 million partnership with Texas A&M University’s World Coffee Research Center to look for a way to eliminate the fungus.

The chief concern is not necessarily consumer prices for coffee drinks, but the economic security of the small farmers working abroad. The livelihood of these farmers helps curb hunger, poverty, and violence and drug trafficking in the region. Losses from the fungus could lead to as many as 500,000 lost jobs, according to government estimates. Guatemala, El Salvador, Honduras, Panama and Costa Rica are at the greatest risk. 

Producer Price Index Rises Significantly

Producer prices rose by the highest factor in more than a year, which indicates a diminishing risk of deflation, Bloomberg News reports. Figures from the US Department of Labor indicated a 0.6 percent rise in the producer price index in April, the largest increase since September 2012. Costs have risen 2.1 percent for the past 12 months, with food prices surging the most in three years.

April’s increases ranged from poultry to trucks and transportation. Bloomberg News reports this indicates a stronger world economy. “The trend is not threatening as long as it’s gradual and remains below central bank targets,” says Markus Schomer, chief economist at Pinebridge Investments. He adds, “The path from higher producer prices to higher consumer prices usually takes a little while.”

Former Federal Reserve chair Alan Greenspan says that inflation is a potential threat, but he doubts it is about to run rampant.

As materials make up a small portion of final costs of goods, higher producer prices don’t always lead to higher consumer prices, says Neil Dutta, US economics head at Renaissance Macro Research. “Producer prices have a fairly spotty record of tracking consumer prices because there tends to be slippage along the supply chain,” he says.

Vietnamese Unrest Disrupts Global Retailer Supplies

Workers at Vietnamese factories that supply global retailers such as Nike and Walmart are halting production as the country is swept by violent protests, the Financial Times reports [subscription required]. Factories near the capital have been attacked by protesters condemning China’s oil-drilling in disputed waters in the South China Sea.

Global retailers face many supply chain issues, including rising labor costs in China, safety concerns in Bangladesh, and political unrest in Thailand. As the Times reports, the protests in Vietnam are only the latest in a string of incidents for companies that depend on Asian supply. 

At Formosa Ha Tinh Steel, one Chinese worker was killed in a violent demonstration.“Our factory has been shut down,” says Tsai Chih-fa, a senior executive at the Vietnamese steel mill, where 5,000 Chinese people work. “I don’t know when we will restart production. It depends on when the local government can control the situation.”

Supplier Relationship Rankings Reveal US Auto Companies Lagging

PPI, an automotive supplier research firm, has issued the results of its 14th annual survey on US and Japanese automakers’ relations with their suppliers. The US “Big Three” automakers, Ford, General Motors (GM), and Chrysler, continue to lag behind Japanese competitors Toyota, Honda, and Nissan, which finished in the top three positions.

The study also found the following:

  • Toyota and Honda have seen positive results in efforts to improve supplier relations, extending their lead over the rest of the pack.
  • Nissan improved considerably, overtaking Ford for third place.
  • GM, despite a focus on supplier relations, is now last place among the six companies surveyed.
  • If the largest German automakers were included, BMW would be second overall, Mercedes in the middle, and Volkswagen would be a distant last place.

The PPI study evaluates responses  from 441 salespeople at 362 tier-one auto suppliers to determine which companies offer suppliers the best working relationships. Factors quantified by the study include overall supplier relationship, communication, assistance given, collaboration, and supplier profit opportunity. 

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