Coffee Shortages are Brewing in Brazil

Driven by market uncertainty and supply shortages in Brazil, global coffee prices are increasing and will continue to do so. Coffee inventories in South America are declining so badly that reserves are forecast to be dangerously low.

Coffee prices have been volatile in recent months, but the situation is pegged to get even worse in the weeks ahead as Brazilian coffee exports hold onto their supplies to drive up prices.

A wave of persistent weather conditions is affecting coffee market dynamics in South America. Brazil faces severe dry spells as the country waits for much-needed rain. In contrast, heavy rain from La Niña weather phenomena is affecting coffee crops in Colombia.

Guatemala, Honduras, and Nicaragua are also all dealing with adverse weather conditions. Vietnam - the second largest producer in the world after Brazil, with Robusta coffee accounting for 97 percent of Vietnam’s total output – is also witnessing a decline in stockpiles.

All this is occurring amid a landscape of food inflation that is affecting most, if not all, commodities.

The rapid onset of climate change is, of course, behind the challenges being felt within the coffee industry. The climate crisis shows no sign of abating, with adverse weather threatening to endanger growing conditions further. Intense rains or prolonged dry spells make farming more difficult.

All these market dynamics lead to price spikes in coffee around the world. Coffee giants like Starbucks, Lavazza and Costa will absorb the price hikes and pass them on to the customer.