As the world’s largest coffee exporter, Brazil is essential to the global coffee economy. In an already chaotic supply chain, Brazil has been experiencing extreme weather which is threatening coffee farms and limiting production. There are multiple factors contributing to the coffee industry’s shortages and delays, which has led to the highest prices in almost a decade.
Extreme Weather in Brazil
Over the last year, Brazil has been hit by a series of adverse weather conditions. In early 2021, drought swept the country which created a strained coffee season and low production. Then, in July and August of 2021, the main coffee-producing region was struck by an unusually bad frost leaving many of the coffee fields covered in ice.
Coffee production experts estimate 20% of Brazil’s coffee crops were lost because of the weather. With climate change worsening, farmers are expecting coffee production uncertainty to get worse as the number of extreme weather events increases each year.
Global Market Uncertainty
Brazil is the world’s leading coffee exporter with almost double the exports of the second largest producer, Vietnam. With such a devastating impact on Brazil’s coffee production this year, the repercussions will be felt across the globe likely extending into 2023 and beyond.
Shortages vs. Demand
In the United States alone, roughly 62% of people drink coffee every day which means the historically high prices of coffee are being felt by everyone from farmers to end consumers.
The shortage is causing many farmers and roasters in Brazil to switch to a cheaper, more bitter variety of beans, despite the global demand for premium and specialty coffee beans skyrocketing over the last few years. In addition to the coffee bean shortage, many coffee suppliers and coffee shops are experiencing other supply chain shortages for equipment, serving utensils, specialty coffee accoutrements and more.
Overall, the demand for coffee is up and supplies are down, which leads to upset consumers, supply chain uncertainty, and most of all – higher prices.
Price Hikes
The international price of coffee went up 21.6% in 2021 to roughly $3.65 a kilogram, which hasn’t been seen in almost a decade. Many coffee importers are paying up to 45% more for beans than previous years, in addition to already higher costs for transportation.
Many of these businesses were already struggling because of the pandemic’s effect on demand and staffing. Some are taking on part of the cost themselves, but most businesses have to pass additional costs onto the end consumer. Whether supporting a local coffee shop or buying a bag of beans at the grocery store, the general public will see raised prices to help account for the higher cost of goods across the globe.
Importing and exporting companies may start feeling a need for increased cash flow due to supply chain volatility.