Business & Economy

Drinking coffee: an ever more costly pleasure in Latin America

International Desk, Apr 26 (EFE).- Coffee drinkers throughout Latin America will continue paying dearly for each cup because of a “perfect storm” affecting the sector – namely, higher inflation brought by the economic reactivation after the coronavirus pandemic, extreme climate events, logistical challenges due to Covid-19 and the fertilizer supply crisis caused by Russia’s invasion of Ukraine.

These factors have not only put the supply of coffee for millions of consumers at risk but also have been causing alarms to sound in the financial markets since last year when the price of coffee beans rose by 80 percent to heights not seen in a decade.

One of the most dire chapters in this saga has been written in Brazil since 2021. Last year, coffee crops were hit by poor climate conditions: first, a prolonged drought and, months later, the worst freeze seen in that country since 1994.

Given that situation – which in the opinion of the analysts consulted by EFE has also been influenced by the logistical problems linked to the pandemic – the average price of a sack of coffee beans in Brazil rose 74.5 percent over the past year, moving from $131 in the first quarter of 2021 to $228 between January and March 2022, according to figures from the Coffee Exporters Council (Cecafe).

We’re talking about a country that has significant clout vis-a-vis the international prices of coffee due to its status as the largest world producer and exporter. In the last decade, about 70 percent of Brazil’s production was exported.

The price increase allowed exporters to bill 60.8 percent more in the first three months of this year, some $2.424 billion, the largest quarterly amount in the past five years, despite the fact that export volume diminished by 7.8 percent.

The 60 percent increase over the past year in the coffee price – according to the latest inflation data – has also been felt in Brazilians’ pocketbooks, given that they are the second biggest consumers of coffee in the world.

Colombians have also seen inflation’s mark on coffee, with prices there rising 29.36 percent between April 2021 and March 2022, according to the National Administrative Department of Statistics (DANE).

Coffee is one of the products experiencing the biggest price increases in Colombia, along with potatoes, bananas, cassava, edible oils and meat.

The “persistent unfavorable climate conditions” have affected production of the beans, which fell 16 percent in price in February, the National Coffee Growers Federation said.

Colombia is the world’s biggest producer of Arabica coffee, and 540,000 rural families make their livings in the sector.

Coffee growers in the Andean country, however, have not been much affected by the rise in prices apart from their ongoing complaints about the relatively high cost of fertilizers.

And they acknowledge that, in the end, they are making greater profits from their product, thus enabling them to alleviate the difficulties brought by higher costs of other products in the production chain.

In Peru, the world’s 10th-largest coffee producer, inflation in coffee prices is “still not being felt” in the sector. In fact, expectations are that at least through mid-year prices will remain at their 2021 levels, oscillating between $10.80 and $21.60 per kilogram (2.2 pounds), according to quality.

This is due to the fact that up through June of this year producers will be selling the coffee from the past harvest, when prices of fertilizers were not so high and were more readily available, the manager of the National Coffee Board (JNC), Lorenzo Castillo, told EFE.

“Today, even if you pay the international market price fertilizers are not available, and I hope that this scenario starts to improve starting in June because if not there’s going to be production scarcity and increasing costs,” he said.

The annual coffee harvest could drop from 266,000 tons in 2021 to 240,000 tons in 2023, producers estimate. But prices “are going to have to maintain themselves” with an eye toward being competitive, given the overproduction expected from other countries like Brazil, he added.

“What’s going to be seen to affect things will be the price of instant coffee due to the rise in the dollar, which could be what limits imports,” Castillo said, and it will be organic coffee that will most probably bring about an escape from inflation.

In Mexico, roasted coffee prices rose by 15.94 percent year-on-year as of March 2022, according to the National Statistics and Geography Institute’s underlying merchandise index, which currently shows overall inflation to be above 7 percent, the highest level in two decades.

Despite the rise in prices, the Agriculture and Rural Development Secretariat (Sader) calculated that there will be a 5 percent rise during 2022 in the cultivation of cherry coffee to 994,400 tons and a rise of 1.4 percent, or 5.209 billion pesos (about $260 million) in the crop’s value.

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