The world's largest coffee producer is facing a reduction in production. Will the price of coffee go up?

Brazil, as the world's largest coffee producer, its output has a significant impact on international coffee prices. In 2021, Brazilian coffee production experienced a century-old drought and severe frost. Last year, Brazilian coffee production fell by more than 22%. Coupled with shipping tensions, Arabica coffee futures prices nearly doubled in a year.

Yesterday, CCTV Finance reported that Brazil, the world's largest coffee producer, was facing production cuts. 2022 used to be the "big year" of Brazilian coffee production, but according to figures released by the National Commodity supply Company under the Brazilian Ministry of Agriculture, compared with 2020, which is also a big year of production, Brazilian coffee production is expected to decline by 15.3% this year.

The impact of climate change on Brazilian coffee production is very obvious. Last year, drought and frost disasters caused some damage to Brazilian coffee crops, curbing the yield potential of Brazilian coffee crops in the next two years. The state of Minas Gerais received only 9.5mm of rainfall last week, 44 per cent of the historical average, while Arabica coffee production accounts for as much as 30 per cent of Brazil's total production, according to Somar Meteorologia, a Brazilian weather company.

A CCTV reporter visited the coffee plantation, and the person in charge of the plantation said that they were very worried about the lack of chemical fertilizer in the market, so they purchased chemical fertilizer in advance, but they still have a lot of chemical fertilizer to purchase in the future. Brazil's agricultural production is highly dependent on imported chemical fertilizers, about 85% of which are imported, and Russia and Belarus together account for 28% of its total imports. The conflict between Russia and Ukraine has blocked fertilizer exports from Russia and Belarus, adding uncertainty to Brazilian coffee production.

In previous years, coffee plantations buy fertilizers in July, but this year, due to external factors, coffee plantations began to buy fertilizers four months ahead of schedule. However, due to the shortage of supplies, the reported stock of chemical fertilizer in the coffee plantation can only meet the use of the next six months. The person in charge of the coffee plantation said that he was not sure about the future supply of chemical fertilizer.

Brazil's main fertiliser prices have also shown a clear upward trend, from $350per tonne last year to $1300 this year. According to the New York Times, some fertiliser prices have risen by 40% since the conflict between Russia and Ukraine intensified last month. Rising costs make it difficult for coffee plantations to make money. As a result, Brazilian coffee growers began to re-detect and evaluate the nutrients and content of the soil, reducing the amount of fertilizer applied to crops as appropriate.

In addition to buying compound fertilizers, the head of the coffee plantation interviewed by a CCTV reporter also showed other types of fertilizers that the plantation began to use, such as organic compost made of coffee fruit shells and animal manure, as well as quicklime fertilizer.

In addition, with the rise in fuel prices, transportation costs have soared, and the price of container transport has increased by three to five times.

As of today, Arabica coffee bean futures closed at 224.63 cents per pound on June 13, down 1.87 percent from 228.90 cents on June 10.

Photo Source: CCTV Financial Weibo, Internet

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