The whole world feels the Brazilian sneeze
International Coffee Organization (ICO), 1963 The United Nations-backed intergovernmental organization said last month that the price of the ICO Composite Indicator, the main benchmark for the global coffee industry, had hit a 13-year high and averaged 226.83 cents, or about US$2.27 per pound, reports CNN.
“Coffee is a very complex commodity. That’s partly because price is affected by multiple supply and demand systems, said Ryan Delany, founder and chief analyst at Coffee Trading Academy.
Also, there just isn’t enough coffee in the world. “Coffee is more sensitive to changes in temperature than many other crops,” said Michael Hoffmann, professor emeritus at Cornell University’s College of Agricultural and Life Sciences.
“Climate change is getting worse. Just imagine the harsher weather, the rising temperatures and the direct impact on the people working in the coffee plantations,” he emphasized.
Coffee connoisseurs often say that when Brazil sneezes, the whole world catches a cold, a reference to Brazil’s leading producer of Arabica, the premium coffee variety that accounts for more than 60 percent of the world’s coffee. all produced coffee, grower.
When in 2021 after unusually severe summer frosts destroyed crops in Brazil, the coffee market was immediately hit by a supply shock as US Arabica futures hit 260 cents a pound. According to Delany, coffee prices typically range between 100 and 140 cents, but have consistently stayed above that range for the past three years.
Here, in the mountainous highlands of Chiapas, southern Mexico, on the Edelman family farm, around 150 coffee farmers work for hours with their hands. The only barrier between their bodies and the summer sun is the shade of the trees.
Tom Edelmann, a fourth-generation coffee farmer and vice president of the International Coffee Farmers Cooperative, told CNN that while their shade-grown coffee production method is more drought-tolerant, this year’s crop still suffered due to a longer-than-usual dry season, which he blames on climate change.
“If you don’t have the right weather, you won’t have the right production,” he said, adding that low yields also increase coffee production costs.
The impact of frost on Arabica coffee is not over
According to CNN, it is not uncommon for buyers to switch between arabica and robusta coffee types, the cheaper coffee beans used in the production of instant coffee. As more people flock to the market to choose Robusta, this also affects the price.
“In general, when arabica coffee goes up, so does robusta,” he said.
However, it is rare for Robusta to exceed Arabica in demand, but due to the ever-increasing prices of Arabica, this is exactly what has happened.
Robusta is a much more resilient plant than its counterpart, but despite being able to withstand longer dry spells, recent crops have still suffered from droughts and higher-than-normal temperatures.
In May, the U.S. Department of Agriculture reported that Vietnam, a major producer of Robusta beans, had suffered several years of adverse weather conditions, causing exports to drop 7 percent. he noted in his annual report that he expects such weather conditions to become more frequent “due to climate change”.
Neil Rosser, director of Bison Luxley Commodities and a commodity consultant specializing in coffee, noted that while Arabica is usually the dominant type of coffee, this year the overall cost of coffee is being boosted by the rising cost of Robusta.
“Climate change is playing in the background, which is causing problems,” he said. “It’s going to affect the stability of the market and it’s not going to go away for a long time.”
Coffee retailers have already felt the pressure.
Italian coffee maker Lavazza said in a statement to CNN that it raised prices this year for a variety of reasons. “Poor harvests, climate change, the war in Ukraine, the conflict in the Red Sea, the intervention of speculators and a strong dollar have created a ‘perfect storm’ for the coffee industry that has caused prices to rise rapidly since the start of the pandemic,” the company said.
And the president of the company, Giuseppe Lavazza, in comments about which in June wrote “Financial Times”, said that he expects the price of supermarket coffee in the United Kingdom to increase by another 10%.
In 2023, the owner of Nescafe, Nestle. explained the decrease in the profit margin by the increased costs of Robusta. June the company said it faced tougher pricing conditions as budget-conscious consumers backed away from it after previous price hikes. Nestle declined to comment for this story.
Starbucks fans, on the other hand, probably won’t see a higher price on their drinks just yet because the company buys coffee well in advance using so-called fixed-price contracts, where it agrees to buy coffee at a certain price over a long period of time, and uses hedging strategies to lock in prices. and would protect customers from market fluctuations.
“If coffee prices jump, companies like Starbucks can just hang on for a while because they have so many fixed-price contracts and so much coffee,” commented Sharon Zackfia, head of consumer equities research and restaurant analyst at William Blair.
But even so, Rosser says, if costs continue to remain high, a more expensive cup of coffee is inevitable.
“Roasters like to keep their retail price stable. They don’t like to upset their users. However, sometimes this is not possible if the price rises too much,” he assured.
Despite the rise in prices, experts can be sure of one thing: the demand for coffee will not decrease in the near future.
Prepared according to information from CNN.
2024-08-13 01:46:45