A Coffee Shortage Is Driving Up Prices, And You Can Blame Climate Change

Record drought in Brazil, the world's largest coffee producer, is reducing crop yields and driving up the price of beans.
July 15, 2021, 1:00pm
A Coffee Shortage Is Driving Up Prices, And You Can Blame Climate Change
Image: Bloomberg / Contributor via Getty Images

This summer’s record drought in Brazil is straining global supplies of coffee and driving up prices. It’s the latest of a series of climate-related events to threaten the crop, which requires “Goldilocks” growing conditions that are becoming increasingly untenable in a changing climate.

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Brazil’s drought—the worst the country has seen in nearly a century—is driving up caffeine costs in the grocery aisle and at the breakfast table. Higher-than-average temperatures and lower-than-average rainfall are currently clustered right around the Southeast regions that are responsible for the majority of the country’s coffee production (Minas Gerais, which supplies around 50 percent of the country’s beans, São Paulo, Espírito Santo, Paraná, and Bahia). This has caused a sharp drop (around 30 feet) in water level around the Paraná River basin, which irrigates many of the crops in this region.

Brazil produces more than a third of the world's coffee beans, so this is not good news for Brazil or coffee drinkers everywhere; and the federal government is taking note. In May, the Agriculture Ministry issued an “emergency drought alert” for June through September—Brazil’s winter season—predicting scarce rains that could also exacerbate wildfire risk in the Amazon. Notably, severe weather also puts the wellbeing of the country’s economy, and a large portion of low-income smallholders (family growers that own a handful of hectares of land and rely heavily on family labor), at risk. 

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These small farmers make up a majority of Brazil’s coffee industry, which has seen its bean harvest drop by an estimated 19 percent this year. That’s 15 million 132-pound bags less than last year, the Wall Street Journal reported on Monday.

“When Brazilian production tanks, the global price goes up, because there's an overall shortage of coffee”

So, if you’ve noticed your coffee order has cost more than usual lately, it may be because of climate change. The supply-demand gap has caused futures for arabica (the variety native to Ethiopia that’s most common across the US) and robusta (a hardier, but bitter-tasting variety primarily used in instant coffee and espresso) to surge over 18 and 30 percent, respectively, in the last three months, according to WSJ. Those costs drip down to the average consumer relatively quickly: The average bag of Brazilian Arabica beans was $1.50 per pound in June, according to the International Coffee Organization, compared to 98 cents per pound in July of 2020.

“I’ve been growing coffee for more than 50 years, and I’ve never seen as bad a drought as the one last year and this year,” Christina Valle, a third-generation coffee grower in Minas Gerais, Brazil’s biggest coffee-growing state, told WSJ. 

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Arabica coffee, the primary variety grown in Latin America, requires precise growing conditions: rich soils, moderate temperatures (between 64 and 70 degrees fahrenheit, to be specific), shade, regular rainfall, and an environment that’s generally free of frost and pests, like coffee leaf rust, a fungus that kills coffee tree leaves. It takes several years of careful cultivation for a coffee plant to bear fruit. 

Any variance in these conditions can affect yield and quality. Too much sun exposure, for instance, can over-ripen the fruit of a coffee tree, affecting the flavor of the beans inside and their subsequent market value. Too much rain can dislodge flowers and promote mold growth. And a lack of moisture, like Brazil is experiencing right now, can stress coffee plants, causing them to lose their leaves and branches. 

It’s a difficult formula to get right, and shockingly few of the country’s smallholders are equipped to withstand the rise in weather variance that comes with climate change, notes Dr. Rachael Garrett, assistant professor of Environmental Policy at ETH Zurich, who published a paper on climate change and Brazil’s coffee supply in the journal Environmental Research Letters last year. That research correctly anticipated that coffee growers in Minas Gerais would be the most vulnerable to climate change, as temperatures in Brazil’s coffee-growing municipalities have steadily declined by around 0.25 degrees celsius per decade since at least 1974.

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“You would be shocked by how few farmers actually receive any technical advice,” Garrett said in an interview. “You can have all the innovation you want in the world... but none of that is going to have any impact on these farmers in their production if it doesn't reach them.”  

Widely cited estimates show that by 2050, around half the land currently used to grow beans worldwide will no longer be suitable for production—both because of environmental changes and because of the country’s lack of preparedness to handle them, Garrett said. Though coffee crops experience natural biennial variability (with one weaker season followed by a stronger season) and can regrow in the span of around 3 years, some farmers lack the capital to start from scratch if they lose a chunk of their crop. Those who can’t bounce back will have little choice but to leave the trade, reducing supply volumes and likely making it more expensive for the average consumer to get a cup of joe. 

Warming temperatures are also forcing farmers upward, ascending mountain ranges in search of cooler conditions—but Garrett says this is hardly a solution. 

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“If it's being produced somewhere new, it's most often going to come at the expense of existing forest,” she said. “There's no one who really wins… there's going to be a lot of additional negative social impacts from the environmental consequences of having to shift coffee production.”  

Garrett instead advocates for meeting coffee farmers where they are, literally. Social support systems like government insurance, cash programs, and fertilizer deployment can help coffee farms stay afloat through tough periods, while training and assistance programs can offer them the technical expertise to withstand environmental pressures. All of these solutions could prevent farmers from having to find and move to new growing area, of which there’s a finite amount. 

Brazil isn't the only major coffee producer being hit hard by climate change, although it is by far the largest. Other parts of the world that support the coffee industry face similar climate stressors: in Colombia, heavy rainfall is threatening to spread fungal disease around coffee crops, while Honduras saw drought decimate 75 percent of its bean harvest in some hard-hit areas in 2019.

Hanna Neuschwander, strategy and communications director at World Coffee Research, says the hold Brazil’s supply has over the global market will undoubtedly affect these areas, too, raising prices across the board. 

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“When Brazilian production tanks, the global price goes up, because there's an overall shortage of coffee,” Neuschwander said.

This is part of a larger problem of consolidation in the java world, Neuschwander said. The country’s share of the market far outweighs other producing countries in the top 10, like Uganda, India and Peru, which hover between offering two and six percent of worldwide bean supply. 

“What happens in Brazil can deeply affect the entire market,” Neuschwander said, citing a 2019 report from the International Coffee Organization that notes that the top five coffee-producing countries now have a hold over 70 percent of the market, up from 57 in 1990. “Brazil continues to capture an ever larger share of that,” she said.

This makes it hard for other countries to pick up their slack when extreme weather comes for Brazilian coffee supply. And while Neuschwander is uncertain about how this year’s drought could alter the global supply chain permanently, Garrett is confident that climate hazards are survivable with the right tools. 

So, is climate change propelling the world toward a day when getting a cup of coffee is impossible, or, at least, too expensive to make sense? 

With the right social safety net and changes to the supply chain Garrett said this can be avoided. But these changes are not incremental. 

“Farmers get very little money, they have very low agricultural productivity, and a majority of the profits are going to companies downstream,” she said. “You can do a lot of good to offset climatic change by actually redistributing who gets more of the profit and supporting those farmers in improving agriculture.”