Aussies are set to pay more for coffee. Here’s why

Australia’s love affair with coffee is a long-standing one and it comes at a certain price.

And now, Aussie caffeine lovers must brace themselves to pay more for a cup of coffee. It’s all thanks to a global shortage of coffee, owing to adverse weather conditions, critical logistical bottlenecks and stringent lockdowns around the world because of COVID.

Until 2019, the average price for a latte in Australia was around $3.96 per cup, but this price is all set to go up if all continues to remain unwell in the global markets.

 

Why are coffee prices spiking?

The major coffee producers in the world have taken a hit due to adverse weather conditions, such as drought and frost, in recent years.

Brazil, which has been the largest coffee producer for the past 150 years, has experienced erratic rainfall and the worst droughts in a century, which had already hurt farmers and destroyed coffee plantations.

This was followed by extremely cold weather this year, which caused further damage to the crop. This means Brazil’s output is expected to fall to its lowest in nearly two decades.

Some plantations in Brazil may need to plant new crops as the damage is so severe. It will be years before the new crop matures, which will subsequently affect world markets.

There’s been a 40 per cent hike in purchasing prices for importers of specialty beans from Brazil.

Vietnam, which is the second-biggest coffee producer in the world, has not only suffered big losses due to rising cases of COVID and the ensuing lockdowns, it has also been unable to transport its beans from the plantations to the cities, meaning they are unable to reach global consumers.

Wide shot of a coffee plantation in Brazil. Source: Getty Images
Bad weather conditions have decimated Brazil’s usually bumper crop. Source: Getty Images

A spate of anti-government protests in Colombia, the third-largest producer of coffee, has led to a record spike in prices this year and has deeply affected market sentiment and global supply.

According to IBISWorld, the world price of coffee has surged 21.6 per cent in 2021 to $3.65 a kilogram. This figure is the 2021 average of monthly prices of both varieties of coffee beans – arabica and robusta green – which are differentiated by their taste and texture.

 

How will this affect Australia?

Coffee industry experts (importers, roasters and sellers) in Australia are speculating we could experience a coffee shortage by November.

The Australian coffee industry has already suffered a blow, thanks to multiple COVID-19 lockdowns, and now importers are forced to pay a higher percentage (40 per cent more) for some of the speciality coffee beans they source from Brazil and other countries.

With the production of growers in Brazil cut by around 25 per cent, Australian importers will have to share the burden of higher prices with roasters, and the catastrophe could continue to affect the coffee industry for the next couple of years.

Coffee beans in bags. Fresh coffee beans background. Source: Getty Images
The production costs will be fed down the line, all the way to consumers. Source: Getty Images

While it might take a little time for the price hike to pinch consumers, businesses are already beginning to take a hit with roasters having to sell speciality coffee to cafe owners at a higher price or at least prepare them for it.

Cafe owners in turn will be forced to charge more per cup of coffee if they hope to recover the higher prices they are paying to procure the beans.

A daily fix of coffee has been a welcome respite for many during the tough times of the pandemic and an increase in prices could leave a bad taste in one great source of joy to thousands of Aussies.

 

Demand outstripping supply

The pandemic has wreaked havoc across supply chains but the demand has been constantly rising.

Global coffee consumption is expected to exceed production this year for the first time since 2017, according to the USDA.

The prices of both robusta and arabica – the more popular bean globally – have hit multi-year highs over the past 12 months. In August this year, coffee prices recorded their tenth consecutive month of increases.

Rising demand and low supply, coupled with supply chain issues – including a dearth of shipping containers, shortage of labour and other production hurdles – means a more expensive, and bittersweet, cup of coffee is brewing for enthusiasts across the globe.

 

Article from: au.finance.yahoo.com