Record Brazilian drought causes coffee prices to spike to highest level in years

A once-in-a-century drought in Brazil has walloped the world's largestcoffeecrop, pushing up wholesale prices to their highest level in years.

The going rate for prized arabicabeans was almost$1.70 US a pound at one point this week. That's almost 60 per cent higher than it was last summer.

Abnormally dry conditions late in the growing season in Brazil are the main culprit, as Brazil typically produces about one-third of the world's supply ofcoffeebeans.

Rainfall in the agricultural region ofMinasGeraiswas the lowest on recordin the summer months, which stretch from January to April in Brazil. That's normally whencoffeeplants soak up moisture ahead of the drier winter months, when they are harvested.But this year, the rainsnever came.

"Itseemsto have happened at a crucial time, when the crop needs to be absorbing moisture in order to flourish and blossom.And it just didn't happen in time, so the yields were severely impaired," saidKonaHaque, head of researchwith London-based agricultural commodities trader EDF & Man.

It's hard to get a handle on just how small the crop will be, but experts in the field agree it's significant andenough to put world supply below demand for the first time in years.

Part of the problem is that2021 was always more likely to be a weaker than normal year forcoffee. That's because like many tree crops, coffee operates on a two-year cycle, whereyears of plenty tend to be followed by years where the plants produce less.

"They follow this pattern of what's known in the industry asbiennial bearing," said Stuart McCook, a history professor at the University of Guelph who follows the coffee industry closely.

2020 was a bumper crop forcoffee, andbecause that bearing was so heavy, McCooksaid, this past season, "a lot of farmers pruned back the branches of theircoffeetrees so that the tree ... could develop new healthy tissue to bear future crops."

The bumper crop last year looked even bigger than it would normally bebecause of the pandemic, which uprooted the traditionalsupply-and-demand patterns forcoffee.

"The world is slowly coming out of a lockdown andthe pandemic, and that means consumption of coffeeoutside of the home is beginning to recover," said Haque."Demand for outdoor coffee consumption was expected to recover. And just as this demand starts to recover, you're seeing this shortage of supply."

Add it all up and it's a recipe for record prices, from farm to cup.

Losel Tethong, the founder and president ofPropeller Coffee, an artisanal coffee roaster in Toronto, sources as much of his coffee as he can from independentfarmers because he's a big believer in sustainability, sohe's glad to see higher prices for them. But it's also a challenge for him to sell the finished product without passing thosecosts on.

"It's great to see that price go up; it's just trying to absorb that in less than a year,it's tough," he said.

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The pros and cons of higher coffee prices

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Artisanal coffee roaster Losel Tethong says he's glad to see farmers getting more money for their beans, but it's hard to not pass those higher costs on to consumers. (Amanda Perobelli/Reuters)

Like many retail-focused businesses, when the pandemic hit, Tethongsaid he lost about 80 per cent of his customer base. He has managed to slowly and steadily grow his e-commerce business, selling bags direct to consumers, but COVID-19 has increased the cost of just about everything, including supplies like filters and machines, andtransportation costs.

"We haven't raised prices as a company in five years," he said. "We're continuing to do everything we can to keep our prices down, but this year, we implemented a small five-per-centprice rise on our retail price of coffee."

That five-per-cent hike for the good stuff is nothing compared to what's happening with the cheaper, mass-produced blends, said Sylvain Charlebois, a professor of food policy at Dalhousie University in Halifax.The price of coffee at the grocery store is up by 17 per cent since January.

"There's something going on," he said. "Whatever food product is out there, manufacturers[are] chargingmore to grocers and that will catch up with us eventually."

Impact of climate change

It's not just tropical crops like coffee that are impacted.

Canadian staples such as wheat, canola and barley are also seeing record prices right now because extreme heat in Western Canada has drastically impacted this year's crop yields.

Just as is the casewith those crops, experts who spoke to CBC News say climate change is playing a role with coffee, too which means drinkers should get used to jittery java prices.

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How climate change is affecting coffee

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Stuart McCook, a professor at the University of Guelph with an interest in export commodities, says coffee plants are reacting to the changing climate by growing in places where they didn't before, and dying out in other places.

On top of the drought that hurt this year's harvest, Brazilian farmerswere alsohit by previously unheard of frost, which is bad news for next year's crop.

"This drought is not a normal occurrence, but at the same time, the frost that just happened last weekis the second time in three years that it's happened," Haque noted.

"It's possible that we're going to have to live with more extreme weather conditions.And if that's the case then ... supply will vary, and whensupply varies,inevitably prices are going togo up and down."

That means for coffee lovers, uncertainty will be the name of the game from now on.

As Tethong puts it, "we're kind ofupagainstthe clock with climate change and other pressures."