2024-08-02 01:34:09
Tucked away in the mountainous highlands of Chiapas in southern Mexico, some 150 growers coffee on the Edelmann family farm they do long hours of manual labor. The shade of the tree canopies is the only barrier between their bodies and the summer sun.
Tomas Edelmann, a fourth-generation coffee farmer and vice president of the International Coffee Growers Cooperative, told CNN that while the shade method of coffee production is more drought-tolerant, the longer-than-normal dry season, which he blames on climate change, caused damage to crops this year. “If you don’t have the right weather conditions, you won’t have the right production,” he said. “And with low yields, obviously your production costs go up.”
These higher production costs could lead to coffee price inflation: Coffee lovers may have to pay more in future as prices skyrocket. Coffee experts also signal that prices could remain higher for longer as factors such as climate change reduce the global supply of coffee.
The International Coffee Organization (ICO), an intergovernmental organization founded in 1963 with the backing of the United Nations, reported last month that the ICO composite index price – a key benchmark for the global coffee industry – had 13 year highwith an average price of 226.83 cents, or about $2.27 per pound.
“Coffee is a very complex commodity. Part of the reason for this is because you have multiple supply and demand frameworks that affect price,” said Ryan Delany, founder and chief analyst at Coffee Trading Academy. And, as he said, simply there is not enough coffee in the world.
Climate change is driving up prices
“Coffee is more sensitive to temperature changes than many other crops”, said Michael Hoffmann, professor emeritus in Cornell University’s College of Agricultural and Biological Sciences. And recent climate-related events are not helping production.
“THE climate change is getting worse. Just imagine more extreme weather events, rising temperatures and the direct impact on the people working in the coffee plantations,” he said. “Probably for (consumers), coffee is just going to get more expensive.”
Coffee connoisseurs often say that when Brazil sneezes, the rest of the world catches a cold – a reference to its status as the number one producer of Arabica, the high-quality coffee variety that makes up over 60% of total coffee production.
So when an unusually hard frost decimated its crops in the summer of 2021, the coffee market suffered an immediate supply shock, as US coffee futures, which track Arabica, hit a high of 260 cents a pound. According to Delany, coffee prices typically range between 100 and 140 cents, but have remained consistently above that range for the past three years. But the frost’s impact didn’t stop at Arabica.
Delany explained that it is not unusual to see buyers switching between Arabica and Robusta, a cheaper type of bean used in instant coffee. And with more people pouring into the market for Robusta, that affects the price as well. “In general, when Arabica goes up, so does Robusta,” he said.
Still, Delany noted that it’s rare for Robusta demand to exceed Arabica demand – but thanks to continued elevated Arabica prices, that’s exactly what happened.
As its name suggests, Robusta is a much hardier plant than its counterpart, but despite its ability to withstand longer periods of drought, recent yields still suffer from droughts and warmer than normal temperatures.
In particular, the US Department of Agriculture reported in May that Vietnam, the leading producer of Robusta, suffered several years of adverse weather conditions that saw export levels drop by 7%. It noted in its 2023 annual report that it expects such weather conditions to become more frequent “due to climate change”.
What does this mean for your coffee?
Coffee retailers have already felt the pressure.
The Italian coffee brewing company Lavazza told CNN in a statement that it raised prices this year for several reasons. “A combination of poor harvests, climate change, war in Ukraine, conflicts in the Red Sea, speculator intervention and a strong dollar created a ‘perfect storm’ for the coffee industry which has seen prices rise since the pandemic,” the company said. And the company’s chairman, Giuseppe Lavazza, said in comments reported by the Financial Times in June that he expected the price of coffee in UK supermarkets to rise by a further 10 per cent.
Meanwhile, Nestle, its owner Nescafé, attributed the drop in its 2023 profit margin to the increase in Robusta costs. The company said in June that it faced a tougher pricing environment as resource-conscious consumers moved away after previous price hikes. Nestle declined to comment for this story.
Despite the price hikes, there’s one thing experts can be sure of: The demand for coffee is not going to decrease anytime soon.
Source: CNN