Coffee prices have risen rapidly since the beginning of the year. In addition to high transport costs in South America and political unrest in Colombia, it is above all the extreme weather conditions in Brazil that are causing the price to explode.
Brazil is one of the most important coffee producers in the world. In recent years, however, the country of origin of the Arabica bean has been increasingly troubled by extreme weather phenomena. First the South American country was hit by a devastating drought, and then in winter, frost destroyed many of the plants on the plantations. The consequence: coffee prices rise dramatically. The price for Arabica coffee planned for later trade was just under 3.50 euros per kilo on Friday – and thus at the highest level since 2014. Consumers will therefore have to be prepared for higher prices in the future.
Since January, the price of Arabica coffee has soared by 60 percent. And the price of Robusta coffee – which is used for instant granules and is mainly grown in Asia – has also seen a price increase of almost 40 percent in the year to date.
“There are several reasons for the astronomical rise in coffee prices,” says Rabobank analyst Carlos Mera. The main reason is the devastating weather conditions in Brazil, but rising transport costs and political unrest in the third largest production country, Colombia, also play their part.
Drought in Brazil destroys coffee plants
Brazil suffered an historic drought earlier this year. Last week, frost followed on key plantations in Minas Gerais – an inland southeastern state that is where 70 percent of the country’s arabica beans come from. “The freezing temperatures caused leaf fall and destroyed the youngest plants,” says Mera. However, these are crucial for future harvests.
Arabica is also so badly affected because the plant has a two-year cycle, in which low-yield production in one year is followed by a bumper harvest in the next. At the same time, global coffee demand picked up again sharply after the effects of the corona pandemic, while café and restaurant operations were partially restricted.
Consumers won’t feel the price rise for nine months
Consumers are currently not aware of any of this, but that can change: The rising prices would only be passed on to consumers slowly, says Mera. “The roasters use the price planned for later trade to hedge against short-term increases,” says the expert. Therefore, it usually takes three to nine months for the effects to be felt in retail.
In addition, the cost of coffee has been particularly low in recent years, as raw materials economist Philippe Chalmin explains. He recalled that a kilo of Arabica cost over five euros in May 2011.
In the end, it was not the consumers but the producers who suffered, says Valeria Rodriguez from the fair trade association Max Havelaar. You would have experienced a very long price crisis. “In the past four or five years most of them have worked at a loss,” she says. The new crop damage made the situation even worse.
Jane Stock is a technology author, who has written for 24 Hours World. She writes about the latest in technology news and trends, and is always on the lookout for new and innovative ways to improve his audience’s experience.
