Commodities
Caffeine hit
Brazil's coffee harvest is expected to decline by 17.8% in 2021 due to adverse climate conditions as a result of a dry summer. While in 2020 the country's harvest amounted to 69.5 million of 60kg. bags, the total harvest for 2021 is expected to reach 57.1 million bags.
An analyst at the Brazilian Association of Coffee Industry ("ABIC") commented, "It's been a very tough year for Brazilian coffee producers. This has been the driest summer in 20 years and the pandemic has complicated the harvesting process with lockdowns limiting workforce capacity."
"This has been the driest summer in 20 years and the pandemic has complicated the harvesting process with lockdowns limiting workforce capacity."
Analyst, Brazilian Association of Coffee Industry
With these production levels, Brazil would be unable to meet export demands with its current harvest but producers will be able to use some of the five million bags held in stock.
As harvests vary considerably depending on weather conditions, coffee production in Colombia, the second largest exporter after Brazil, looks relatively bright. In the first quarter of 2020 it produced 2.2 million bags compared to 2.1 million bags in 2021.
As a consequence, Brazil is already talking about importing coffee from neighbours, according to one industry executive, "Importing coffee has always been seen as taboo as there is a feeling of national shame in admitting that the largest coffee producer in the world [Brazil] needs to import. But we did it for many years at the end of the 1990s and throughout the 2000s, so it's nothing new."
"Importing coffee has always been seen as taboo as there is a feeling of national shame in admitting that the largest coffee producer in the world [Brazil] needs to import."
Coffee industry executive, Brazil
Thus, overall coffee exports in Latin America are not expected to suffer from production challenges but from logistic problems. According to Bloomberg, shipping costs from Latin America to the US have doubled and cargo-markets have been disrupted. Prices have not yet rocketed as coffee roasters are using stockpiles, but the situation could change if logistics bottlenecks are not solved.
On a global scale, the International Coffee Organisation ("ICO") expected a 0.5% decrease in coffee consumption in 2020 due to lockdowns, but an increase in home coffee consumption will likely prove the numbers wrong once published. For example, US home coffee consumption increased by 4.5% compared to an annualised 3.9% increase for the four-year period between from 2015 to 2019.
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