After Frost, Hail Storm Hits Brazil and Makes your Cup of Coffee Expensive

Published 2021년 10월 2일

Coffee prices in Brazil show a year-on-year high of 136.42% due to continuous disruption in coffee supply and COVID-19. The price started to peak last year due to logistic issues and further picked up pace when frost and hail storms hit the coffee-producing regions of Brazil. A large volume of the coffee crop was harmed which reduced the supply of coffee pushing up the coffee prices and is likely to drive up coffee prices even further in the coming months.

Brazil is the leading coffee exporter and has a 16.45%share in the global trade of coffee. It exports coffee mainly to Germany (19.3%) the United States (18.7%), Belgium (9.4%), Italy (8.4%), and Japan (5.9%). Any kind of weather issue or supply issue which impacts the smooth movement of coffee across different nodes of the value chain is likely to become a global issue. Brazil has already experienced the supply chain snarls, a dearth of shipping containers, labor shortages, and other production hiccups in 2020. The first and hail has further created a coffee shortage resulting in higher prices and eventually a bitter cup brewing for coffee drinkers.

No country on the Earth puts as many coffee cups on breakfast tables as Brazil as the country produces 12% of the Arabica variety. In the second week of July, the worst frost swept off Brazil, up to Central Brazil in Goias state. The lowest temperature registered was -5.2 degrees Celsius in the South of Parana, bringing frosts to the South region, São Paulo, Mato Grosso do Sul, and Minas Gerais states. The region of Minas Gerais biggest producer of arabica coffee representing 75% of the national production was one of the worst stricken regions. A large area of coffee plantations was destroyed due to the frost and cold weather.

The recurrence of unprecedented extreme weather has damaged the coffee crops across the regions and resulted in driving up the cost of coffee around the world. In coffee-growing regions, frost covered the fields. The majority of the coffee beans have turned black due to the hail storm which has resulted in coffee growers have lost more than 50% of their crops. According to the estimates, almost half a million acres of coffee crops were hit by the frost. Following the first, on 25th September the same region witnessed a strong fall of hail in coffee-producing areas. The rain came with a lot of intensity and could further increase the problems for the 2022 harvest. Coffee crops across 60 hectares of land have been affected in the Minas Gerais states due to the recent hailstorms.

The prices of Arabica coffee in the domestic markets of Brazil are currently witnessing a year-on-year high of 136.42%. The prices started to pick up last year due to COVID-19 induced logistic problems and container shortages. When the frost struck Brazil at the end of July 2021, the prices were between USD 2.50 - USD 3 per kg which peaked at USD 3.31 per kg. The prices between these periods were at least 40%-50% more than the prices recorded in 2020 at the same time.

Source: Tridge.

The prices are likely to increase more in the coming months due to supply shortages and consistent demand for coffee across the globe. The coffee's future price has inflated and the future price of the arabica variety for December 2021 has increased by about 25% has in comparison to the week prior to the hair stock.