Global Coffee Shortage Looms as Market Braces for Climate ChangeBy
Crop needs to rise by 50 million bags in 10 years, Illy says
Producers, industry groups meeting this week in Milan
The coffee-drinking world needs another Brazil, the world’s top grower and exporter of the beans, if it’s to avoid a shortage.
Rising consumption, especially in emerging markets, means global production will have to rise by an extra 40 million to 50 million bags of coffee in the next decade, said Andrea Illy, the chairman and chief executive officer of Illycafe SpA, a roaster based in Trieste, Italy. That’s more than the entire crop of Brazil.
Throw in the looming threat of climate change, as well as low prices that are discouraging farmers from increasing output, and you’ve got a potential problem. It’s something producers, government officials and industry representatives are trying to tackle this week at the Global Coffee Forum in Milan.
“Sooner or later, in months or years, we’ll have to make a bold decision about what to do,” Illy said in an interview on Wednesday. “We don’t know where this coffee will come from.”
The world is set for a coffee production deficit of 3.5 million bags in the 2015-16 season that starts on Thursday, Winterthur, Switzerland-based merchant Volcafe said in August. That follows a global shortage of 6.4 million bags the prior year. Brazil’s last crop was hurt by the aftermath of a severe drought in 2014 that drove arabica futures in New York up about 50 percent that year. Since the start of 2015, prices have retreated 27 percent as Brazil’s currency plunged against the dollar, boosting the appeal of the South American country’s exports.
Global coffee consumption will increase by a third to 200 million bags by 2030, according to Michael R. Neumann, chairman of board of trustees at Hanns R. Neumann Stiftung, a foundation that’s affiliated with Hamburg-based merchant Neumann Kaffee Gruppe. Production, pegged at 144 million bags this year, may rise to meet consumption for a balanced market in 2030, as long as smallholder farmers can boost productivity by then, he said in a speech Wednesday in Milan.
Climate change threatens a quarter of Brazil’s output and growers in Nicaragua, El Salvador and Mexico are facing potential losses unless farmers adapt, according to a study published in May by the International Center for Tropical Agriculture. Producing areas may need to shift from Central America to the Asia-Pacific region or eastern parts of Africa, where crops can be grown at higher altitudes, according to the report.
Arabica coffee, the premium bean that’s used by shops including Starbucks Corp., is most at risk from rising temperatures, Illy said. The robusta variety is more resilient or robust, as its name suggests, he said. Brazil is the largest arabica grower and Vietnam is the biggest producer for robusta. Illy only uses arabica.
Farmers are already making changes to adopt to rising temperatures, said Jean-Marc Duvoisin, CEO of Nestle SA’s Nespresso. The company sources coffee from parts of Latin America, Asia and Africa.
“I visit farms quite often, and the farms are always going higher in the mountains, higher in the mountains," Duvoisin said on a panel on Wednesday. “Warming has a negative impact.”
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.