Why coffee prices are poised to surge even further as food inflation rages

A supply crunch of robusta coffee beans in Vietnam — the world’s biggest producer of the bitter bean variety — is poised to send inflation and bthe cost of your already pricey latte even higher.

Futures of the robusta coffee bean — which is primarily used in espresso and instant coffee, as well as some ground blends — have been driven up some 50% in London this year, with prices hitting their highest level in nearly two decades, according to Bloomberg.

With weaker harvests in Vietnam — where one-third of the world’s robusta beans come from — farmers have had a harder time growing their crops and exporters have struggled to source supply, triggering higher costs for coffee-loving consumers.

A months-long drought in Vietnam has hindered the country’s harvest of robusta coffee beans, which are primarily used in espresso and instant coffee. As a result, futures of the robusta bean have been pushed to at least 16-year highs. AP

Farmers and middlemen expect the cost of beans could to reach as much as $5.89 per kilogram, up from the current level of around $5.13, Tran Thi Lan Anh, the deputy director of Vinh Hiep Co., a major Vietnamese exporter, told Bloomberg.

One kilogram of coffee beans can yield between 120 and 140 cups of coffee using a standard single shot of joe.

Thus, the cost of a pound of beans can directly affect how much a coffee shop charges customers for their morning caffeine fix.

However, “we can’t tell when prices will peak,” she added.

Since the 2023-2024 harvest took place in October, Vietnamese robusta coffee farmers have failed to deliver between 150,000 tons and 200,000 tons of contracted beans, according to estimates from seven traders compiled by Bloomberg.

The delivery was equivalent to just 10% to 13% of the harvested crop, per Bloomberg’s calculations.

The culprit: the El Niño weather phenomenon, which has increased global temperatures each time it sweeps across the globe every two to seven years.

Vietnamese robusta coffee farmers failed to deliver between 150,000 tons and 200,000 tons of contracted beans during the 2023-2024 harvest that began in October. AP

This year, El Niño sparked warmer and drier weather conditions across Vietnam, peaking in November and December of 2023, according to local news site VnExpress, spurring a months-long drought that threatens Vietnam’s ability to keep up with coffee demands.

Though coffee beans need tropical climates to grow, optimal coffee-growing conditions see temperatures staying under 80 degrees during the day and also require consistent rainfall to keep soil rich, according to the National Oceanic and Atmospheric Administration.

For reference, El Niño caused provinces in Vietnam to reach peak temperatures last year, at a staggering 111 degrees.

At a meeting hosted by Vietnam’s coffee association in Ho Chi Minh City earlier this month, Swiss food and beverage conglomerate Nestle said the company had to source more beans from Brazil, Indonesia and India to maintain supply to its global factories, according to Bloomberg.

Intimex Group, Vietnam’s largest coffee exporter, also admitted during the meeting that the country had to import some 200,000 tons of coffee beans itself last year — a disappointing trend that’s continuing into 2024.

“If the drought persists, we won’t have lots of new beans to sell in the new season,” said Nguyen The Hue, who grows coffee across six hectares in the province of Gia Lai.

“We don’t have water for our farms,” he added, noting that some of his plants have been infested with white mealybugs due to hot weather, per Bloomberg.

Because of the El Niño-induced drought, many lakes used to irrigate crops have been reduced to critically low levels.


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