O café it is the second most consumed drink by Brazilians, but in 2021 the drink’s taste became more bitter. In the year, coffee beans have already risen more than 110%, according to data from the Brazilian Coffee Industry Association (Abic), and the trend is for the product to continue to rise in 2022, reaching the highest value in 25 years.
The rise in prices is linked to a number of factors. There are, first, the climate damage in the 2021-2022 harvest, but also a small production in 2020-2021, a demand that grew in the pandemic and higher production costs with the increase of the dollar.
The scenario is not exclusive to Brazil, and production problems in other large producers, such as Colombia e Vietnam, also impact prices. This created what Celírio Inácio, executive director of Abic, considers to be a rare scenario, with great speculation surrounding the prices of the product.
coffee crisis
According to Inácio, coffee is a perennial plant, which does not usually undergo major changes in production that lead to higher prices. As a result, product-related crises are rarer, and spaced out over time. But there is a factor in common with them: the cause is climate.
The last major coffee crisis was in 1994, when a frost hit the states of Paraná and São Paulo, which at the time were still the biggest producers. The bag of coffee exceeded US$ 200 at the time with the drop in production.
Before that, the so-called “black frost”, also in the Paraná, affected crop production for 1975, 1976 and 1977, and the picture worsened with the spread of a disease called orange rust. With that, the bag reached US$ 400.
Before that, in 1969, another frost led to the loss of up to 70% of that year’s crop. Another major crisis was that of the 1930s, when there was an overproduction of the product, supply exceeded demand and prices fell.
Brazil was the world’s largest producer of coffee at that time, with the product having great weight in the economy, and the government of Getúlio Vargas decided to buy and burn coffee stocks to keep prices high.
By comparison, the current coffee crisis is following the path of previous ones. Inácio says that, currently, the bag of coffee is around R$1,200, or around US$213, in line with prices from previous episodes.
Factors for discharge
The analysis of coffee prices takes into account, first, the fact that it is a biannual crop. In other words, a bad production in 2021 tends to impact that of 2022, and recovery is only seen in 2023.
André Rolha, an analyst at Venice Investimentos, says that the lack of rain and frosts in Brazil affected almost 589 thousand tons of coffee, especially in São Paulo and Minas Gerais, a state that concentrates around 50% of grain production.
The poor outlook for the 2021-2022 crop is added to the low production in the March 2020 to September 2021 crop. “Last crop [2019-2020] it was a record, but we had an increase in domestic consumption with the pandemic and a record in exports. It was around 60 million bags. This harvest was smaller, should not exceed 47 million bags”, says Inácio.
Low production and the prospect of numbers also reduced in 2022 create a speculative scenario, with prices for the 2021-2022 harvest already being affected. “Depending on how it impacts the soil, the root, the producer can anticipate production and stock up, anticipating a rise in prices, and this has already been passed on to the consumer”, says Rolha.
In addition to frosts, another aspect that has affected coffee prices is the rise in the dollar. On the one hand, the devalued real encourages producers to export coffee, as profitability is greater, but the low supply in the domestic market makes prices rise.
At the same time, a higher dollar increases production costs. “The dollar jumped from US$ 5.20 to US$ 5.70, and this weight reflects on the pricing chain, because inputs, pesticides and fuels are imported”, says the analyst.
Inácio cites as an example agricultural defensives, which have already risen more than 120% in 2021. Producers end up passing on part of these higher costs to consumers, seeking to maintain at least part of their profit margins.
The combination of damming of what has already been produced, waiting for the best time to sell, lower production, higher demand, climate impacts in the next harvest and the strong dollar is pushing the price of coffee to record levels.
There are also factors external to Brazil. According to Inácio, “producing countries like Vietnam, Colombia and Ethiopia have already declared a lower crop production. Colombia has not even managed to deliver the entire promised amount for export. As a result, the market and prices soared both externally and internally.”
The expectation, for him, is that the world “consumes more Brazilian coffee” in 2022 to compensate for these lows, but this occurs to the detriment of supply in the domestic market.
According to the executive director of Abic, the prospect is still for high prices. “We even had good news with the coffee blossoming in recent weeks with good rain, and without it, coffee would be even more expensive. It’s a good sign, but it’s not a certainty.”
The problem, however, is that there is no prospect of the dollar going down, and the trend is that coffee consumption will continue to rise, or remain at a high level, amid a drop in stocks around the world, including in Brazil .
You USA, the world’s largest consumer, should have greater demand, attracting sales. The perspective, therefore, is that the supply and demand flows are unbalanced, with prices rising.
“The producer pays attention to what pays the most. We Brazilians are the biggest producer, and the second biggest consumer. Exports should be booming, but there are problems such as sea freight up to five times greater and lack of container, so the coffee promised for export has not even been exported due to this, but it already has an owner”, says Inácio.
Taking this scenario into account, Rolha states that 2022 should have the maximum price of coffee in Brazil in 25 years. “If you consider that in the year we saw a sack of up to R$600 a kilo, the expiration date in December is already R$1,300 a sack of Arabica coffee. The price has room to go up even more”.
Reference: CNN Brasil
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