Effect of High temperature and drought in Brazil on Coffee Bean Agricultural products; World Coffee Bean production is on a sharp decline

The price of coffee soared after a poor harvest and unmet demand

Global consumption will exceed production this year as Brazil suffers from the worst drought in nearly 20 years.

Global coffee prices are rising and could push up the cost of breakfast tables as Brazil, the world's largest coffee producer, faces one of the worst droughts in nearly a century.

The price of Arabica coffee beans, the main variety produced in Brazil, hit its highest level since 2016 last month. Arabica coffee futures traded in New York have risen more than 18 per cent to $1.51 a pound in the past three months. Robusta coffee, which is traded in London, a stronger flavor popular in instant coffee, has risen more than 30 per cent in the past three months to $1749 a tonne, a two-year high.

Brazilian farmers are preparing for one of the biggest declines in yields in nearly 20 years after months of drought withered plants. Brazil's Arabica coffee crop cycles between a year of prosperity and a year of weakness. After a record harvest in 2020, 2021 will be a weaker year, but the decline will be more severe than expected.

This year, Brazil's total coffee harvest is expected to see the biggest year-on-year decline since 2003, according to the U.S. Department of Agriculture. Its Arabica coffee production is expected to decrease by nearly 1500 million bags of 132-pound bags of coffee compared with 2020.

Others are guarding against a bigger recession. Rabobank, the Dutch agricultural bank, expects the harvest to fall by 1700 million bags, while commodity brokerage ED&F Man, whose Volcafe division is one of the world's largest coffee traders, expects to lose more than 2300 million bags.

Global coffee consumption is expected to exceed production this year for the first time since 2017, according to the USDA. The department expects to consume 165 million bags of coffee beans in 2021, 1.8 million more than last year. At the same time, global coffee production is expected to fall to 1.648 billion bags.

There are other factors behind the rise in prices. Colombia and Vietnam, two other major producers, have much better harvests than Brazil, but are struggling with a different problem: Port delays leave beans idle on the docks.

Exports of Colombian coffee have fallen as anti-government protesters have blocked highways and ports, and baristas are particularly popular because of their mild flavor. Container shortages and soaring freight rates have hit Vietnamese farmers, who produce more than 1/3 of the world's robusta coffee.

Carlos Mera, head of agricultural commodity market research at Rabobank, said: "there is not only a significant increase in costs across the supply chain, but also massive delays." Unlike other goods that can be transported by bulk carriers, coffee can only be transported globally in containers, he said.

Investors are also playing a role, betting that commodities will benefit from generally rising prices. Mr. Mera says some investors have pushed up the price of coffee by putting money into commodity index funds, which track a basket of commodities from industrial metals to coffee and cocoa.

In Brazil, farmers say their remaining stocks are dwindling after last year's bumper harvest, and they fear they may run out before next year's harvest begins.

"We are a little worried about not selling enough next year," said Jose é Marcos Magalh ã es, president of the Minassur Coffee Cooperative. He said that the cooperative urged members to provide the cooperative with any coffee they had so that it could continue to meet its orders.

Coffee lovers can still find a respite. Steve Pollard, a coffee analyst at brokerage firm Marex, said spring rains in Brazil usually occur in September, which is crucial to determine whether damaged coffee plants can recover and produce enough beans during next year's harvest.

Another option, he says, could lead to higher prices. Coffee trees take about 2.5 years to grow, and farmers cannot react quickly by simply planting more crops. "if there is a serious deficit, then prices could soar," he said.