Record drought in Brazil pushes coffee prices to their highest level in years


A unique drought in Brazil devastated the world’s largest coffee crop, pushing wholesale prices to their highest level in years.

The going rate for prized arabica beans was nearly US $ 1.70 a pound at one point this week. That’s almost 60 percent more than it was last summer.

Abnormally dry conditions at the end of the growing season in Brazil are the main culprit, as Brazil typically produces around a third of the world’s coffee bean supply.

Rainfall in the agricultural region of Minas Gerais was the lowest on record during the summer months, which extend from January to April in Brazil. This is normally when coffee plants absorb moisture before the drier winter months, when they are harvested. But this year the rains never came.

“It seems to have happened at a crucial time, when the crop needs to absorb moisture in order to thrive and flower. And it just didn’t happen in time, so yields were severely compromised. “said Kona Haque, research manager with London-based agricultural commodities trader EDF & Man.

It is difficult to assess how small the harvest will be, but experts in the field agree that it is large and sufficient to keep global supply below demand for the first time in years. .

Part of the problem is that 2021 was still more likely to be a weaker-than-normal year for coffee. This is because, like many tree crops, coffee operates on a two-year cycle, where years of plenty tend to be followed by years when plants produce less.

“They’re following this model of what’s in the industry called the biennial rollover,” said Stuart McCook, professor of economics at the University of Guelph who closely follows the coffee industry.

COVID-19 has lowered sales at coffee chains by nearly a quarter. Average prices paid for different types of coffee drinks are shown. (Scott Galley / CBC)

2020 has been a bumper crop for coffee, and because that bearing was so heavy, McCook said last season, “many farmers pruned the branches of their coffee trees so that the tree … could develop new, healthy tissue. to bear future harvests. “

Last year’s bumper harvest seemed even larger than it normally would be due to the pandemic, which uprooted traditional patterns of coffee supply and demand.

“The world is slowly emerging from lockdown and the pandemic, and that means coffee consumption outside the home is starting to pick up,” Haque said. “The demand for beer consumption in the open air had to… recover. And just as that demand starts to pick up, you see this supply shortage. “

Add it all up and it’s a recipe for record prices, farm-to-cup.

Losel Tethong, founder and president of Propeller Coffee, a Toronto-based artisan roaster, sources as much as possible from independent farmers because he is a firm believer in sustainability, so he’s happy to see the prices higher for them. But it is also a challenge for him to sell the finished product without passing on these costs.

“It’s great to see that price go up; it’s just trying to absorb that in less than a year, it’s difficult,” he said.

WATCH | The pros and cons of rising coffee prices:

Artisanal roaster Losel Tethong says he’s happy to see farmers making more money for their beans, but it’s hard not to pass those higher costs on to consumers. (Amanda Perobelli / Reuters) 0:33

Like many retail-focused businesses, when the pandemic hit, Tethong said he lost around 80% of his customer base. He has managed to slowly and steadily grow his e-commerce business, selling bags directly to consumers, but COVID-19 has increased the cost of just about everything, including supplies like filters and machines, and transport costs.

“We haven’t raised prices as a company for five years,” he said. “We continue to do everything possible to keep our prices low, but this year we implemented a small increase of 5% on the retail price of our coffee.”

That five percent increase for the good stuff is nothing compared to what’s happening with cheaper, mass-produced blends, said Sylvain Charlebois, professor of food policy at Dalhousie University in Halifax. The price of coffee at the grocery store has increased 17% since January.

“Something’s going on,” he said. “Whatever food product is available, manufacturers [are] charge grocers more and that will eventually catch up with us. “

Impact of climate change

It’s not just tropical crops like coffee that are affected.

Canadian commodities like wheat, canola and barley are also posting record prices right now because the extreme heat in Western Canada has significantly affected this year’s crop yields.

Much like the case with these crops, experts who spoke to CBC News say climate change plays a role with coffee as well, meaning drinkers should get used to java’s jumpy prices.

WATCH | How climate change affects coffee plants:

Stuart McCook, a professor at the University of Guelph with an interest in export products, says coffee plants respond to climate change by growing in places they previously didn’t and dying elsewhere. 0:53

In addition to the drought that affected this year’s harvest, Brazilian farmers have also been hit by unprecedented frosts, which is bad news for next year’s harvest.

“This drought is not a normal phenomenon, but at the same time, the frost that just occurred last week is the second time in three years that this has happened,” noted Haque.

“We may have to live with more extreme weather conditions. And if that is the case, then… the supply will vary, and when the supply does vary, prices will inevitably go up and down.”

This means that for coffee lovers, uncertainty will now be the order of the day.

As Tethong says, “we’re kind of against the clock with climate change and other pressures.”

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