A reduced coffee crop yield in Brazil, the world’s largest grower, may cause a sharp increase in coffee prices around the world in the coming months, the Wall Street Journal reported on Sunday.
According to trading data, coffee futures surged almost 90% last year after drought and frosts affected Brazilian production. Coffee prices spiked to a 10-year high in February at $2.59 a pound, and remain higher than previous years, up 18.06% year-on-year as of last week at about $2.23 a pound.
Market analysts expect further price increases because of the specifics of coffee harvesting in Brazil. It is traditionally run on a two-year cycle, with farmers collecting larger volumes of Arabica in even-numbered years. However, due to extreme weather in 2021, expectations for this year’s harvest are low, especially given surging costs of fertilizers and transport.
In addition to Brazil, plantations in Colombia, another major coffee exporter, were also affected by wetter-than-normal weather. According to some estimates, the WSJ notes, this year’s yields on some farms are expected to be down 50%.
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According to the International Coffee Organization’s July 2022 report, global coffee consumption is expected to increase and outpace production by the end of the year, which, along with falling yields, could send coffee prices to new record highs.
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