Coffee Prices Hit Six-Year High

Frost threatens the Brazilian coffee bean crop.

July 29, 2021

Coffee Beans

BRASILIA, Brazil—The most severe frost to strike Brazil’s coffee-growing region in more than 25 years is expected to cut a chunk out of next year’s crop, sending prices of the bean to six-year highs around the world, reports the Wall Street Journal.

This is the second weather shock in recent months to strike Brazil, the world’s biggest coffee producer. Before the frost came a drought that parched the 2021 crop. On Monday, fears of another lackluster harvest pushed futures for arabica beans up to $2.08 a pound, their highest level in New York since late 2014. Though they fell on Tuesday, coffee futures climbed almost 30% in July and nearly doubled over the past year, snapping a long stretch of depressed prices that prompted many farmers to abandon their fields.

Widespread frosts struck last week and already appear to have ravaged next year’s Brazilian coffee crop. Farmers and traders had been banking on the 2022 harvest to replenish depleted stockpiles after the drought led to a significantly smaller haul this year.

José Marcos Magalhães, a grower and president of the Minasul coffee cooperative, expects to lose two-thirds of his 2022 harvest. “I normally produce 12,000 bags, and now I think I’ll lose about 8,000,” he said.

The weather won’t harm the 2021 harvest now under way, because the small fruits that bear the beans are protected by the coffee trees’ leaves. But Magalhães said farmers will have to prune their plants or uproot them altogether, shedding about a quarter of next year’s crop.

It will take several months before the extent of the damage is known. Kona Haque, head of research at commodities merchant ED&F Man, said between four million and five million bags of coffee could be lost from the 2022 crop. That is just under a tenth of Brazil’s production levels from last year.

Other factors have also contributed to the looming price hikes. A shortage of containers has created difficulties in shipping coffee from Brazil and Vietnam. Antigovernment protests have obstructed coffee exports from Colombia. Widespread heat waves, fires and floods are causing jitters in broader agricultural markets.

To read more about coffee trends and what consumers are demanding in their brewed drinks, check out “Caffeine Fix” in NACS Magazine.