- Climate change is causing problems in sourcing good quality coffee beans in sufficient quantities to meet demand.
- This mainly affects Vietnam and Brazil for both arabica and robusta beans.
- Reduced supply is pushing up prices, yielding record highs in the global coffee market.
Climate change and trouble in the coffee industry
Global demand for coffee continues to grow, especially in countries such as China, and supply is starting to fail to keep up with the increased demand. Climate change is not helping. Drought is being felt in many parts of the world, including Vietnam, where 40% of the globally produced robusta beans are grown. It is now estimated that the country could harvest its smallest crop in 13 years, leading to a shortfall of 276 million kg. This is the fourth consecutive year that there has been a deficit in coffee production.
This is also felt with arabica, a more expensive variety that is tastier but also more demanding. These grains grow at an altitude of at least 1,000 metres above sea level, in cool and rainy regions. More and more farmers are moving crops to the mountains or starting to grow less demanding robusta. Many growers are looking for lower quality arabica seed.
It is estimated that, due to climate change, by 2050 half of the land currently used to grow coffee will be unsuitable for it. The World Coffee Research Group predicts that in less than two decades, demand will outstrip supply by more than 2 billion kg, almost half of current global production.
The current coffee market situation – is there anything to fear?
The rising prices apply to both arabica and robusta beans. Arabica prices at the beginning of this month reached their highest level in 2 years. As for robusta, September contracts for these grains at the beginning of July were at almost USD 5 000 per tonne. Today, the price has dropped to $4,500 as there is hope for an abundant coffee harvest in Brazil, but these are still the highest prices since the 1970s. The average export price of coffee from Vietnam reached US$3.57k per tonne in the first half of the year, an increase of more than 50% on last year. The amount of coffee exported fell by 11.4%, but profit increased by 33.2%.
Such changes have disrupted the supply of robusta from Vietnam and a poor arabica harvest in Brazil, affecting the entire coffee supply chain. In addition, European importers are reaching for beans faster than every year for fear of the introduction of the EUDR – a regulation forcing proof that the beans were not grown on recently deforested land. The state of the coffee market at present is also affected by the realisation that traders have not been paying coffee farmers enough for years for the beans they source, so there is a growing fear that coffee farmers will abandon coffee farming in favour of more profitable destinations.
However, the low supply has led more and more companies to invest in new coffee plantations. Even if supply were to remain low, coffee consumers should not feel the price rise too quickly either, especially when it comes to coffee shops – in a $5 cup of coffee, only 7 cents is the price of the beans. However, distributors may nevertheless raise prices for fear of losses. Changes in price or quality of beans may also be noticed by those buying coffee beans, ground coffee or instant coffee to make their own beverage.
