ALEXANDRIA, Va.—Brazilian coffee farmers are still grappling with the fallout from wild weather last year, and some say their crop of higher-end arabica coffee beans will be half of what it is in a good year, reports the Wall Street Journal. According to Ole Hansen, head of commodity strategy at Saxo Bank, coffee prices are expected to be elevated over the next three to six months due to low supply of beans, as well as a drop in coffee stocks.
Brazil is the world’s biggest exporter of coffee. Last year’s weather in the country, which gave farmers first drought and then frost, pushed coffee futures to multiyear highs in 2021, and if this year’s crop is smaller than expected it could make international supply shortages worse and increase prices. Bad weather has also impacted Colombia, which is also a major coffee producer.
According to Thiago Cazarini, a Brazil-based coffee broker at Cazarini Trading Co., once estimates from Brazil’s 2022 harvest come in, global arabica prices are likely to rise.
At one point, analysts were expecting the country’s arabica crop for the 12 months starting in July to be on par with the record set two years ago of 48.7 million bags, each holding 132 pounds of coffee. However, the crop is expected to be much smaller—just 35.7 million bags, according to an early official forecast from Brazil.
“This is a big crisis for us,” José Marcos Magalhães, a coffee farmer and president of the Minasul coffee cooperative, told the Journal. His cooperative commits to selling a certain amount of coffee each season, but this year, they’ll only turn in half of the amount they committed.
The cooperative expects to receive less than one million bags of coffee from its members, compared with the 2.2 million it collected in 2020. “Some growers don’t even have that half that we’re asking for,” Magalhães told the Journal.
In addition, coffee demand is outweighing supply, which could pressure prices. Global consumption is expected to outpace production for the second year in a row, according to the International Coffee Organization.
Also, coffee stocks in Intercontinental Exchange warehouses are at their lowest level this century, says Fitch Solutions. Current coffee futures are up compared with recent years, though they are down to $2.23 a pound after hitting an almost 10-year high of $2.58 a pound in 2021 and earlier this year.
Fitch believes coffee prices will stay where they are; however, if Brazil does drop its export numbers and there are a lack of warehouse stocks, prices will remain buoyant. Fitch raised its arabica forecast to $2.15 a pound for the rest of this year, slightly below recent levels.
Coffee consumption has soared to a two-decade high as Americans brew up new post-COVID routines, according to the National Coffee Association. Sixty-six percent of Americans now drink coffee each day, more than any other beverage including tap water and up by nearly 14% since January 2021, the largest increase since the association began tracking data.
After struggling significantly in 2020, hot dispensed beverage sales rebounded in 2021, according to the recently released NACS State of the Industry Report® of 2021 Data. However, coffee sales remained the most impacted by consumer habit shifts and the slow return of the morning commute.
To read more about coffee trends and what consumers are demanding in their brewed drinks, read “Caffeine Fix” in NACS Magazine.