Climate puts pressure on coffee prices, and the sector fears that the drink will become a luxury product

The climatic problems of recent years and the risk for the future, the uncertainty regarding the size of coffee production in the coming years and the challenges of sustainability have generated debates about the crop, especially in Minas Gerais, the main producer in the country.

In addition to concerns about what will come ahead, current coffee prices for the final consumer generate fears of stagnation in consumption.

Solving all the dilemmas involving the coffee chain was the subject of discussions at SIC (International Coffee Week), a fair that brought together 20,000 people in Belo Horizonte, including 3,000 producers from across the country.

In the three days of the event, at least eight discussions in the various Expominas auditoriums dealt with topics such as self-generation in coffee growing, water resource management, ESG, well-being in the countryside, organic production and efficient use of natural resources, including with a forum on the subject, divided into panels.

The fear pointed out by the market is that the severe weather that has affected the crop in Brazil in recent years will become permanent, causing the supply of coffee to be reduced over the years, in an inverse curve to that of population growth.

If that happens, coffee could end up becoming a luxury item. In 2022, the sector realized that there is a limit to the price increase, which today is close to R$ 30 per kilo for the final consumer, in the assessment of Rodrigo Mattos, senior analyst at the Euromonitor consultancy.

Speaker on a panel with updates on the global and Brazilian market accompanied by SheetMattos said that, in addition to economic crises, global or internal, coffee has the “additive” of being an agricultural product.

“He is also in a climate crisis, experiencing this crisis, this very intense climate change that is causing great instability in the market. We had a peak in the price of commodity coffee a few months ago, now it has dropped, but it may increase because we there is frost, hail occurring in November, the market is increasingly difficult to predict,” he said at the event.

With the worsening of the climate crisis between mid-2021 and the first months of this year, the price of coffee increased by almost 60%, according to the IPCA (National Index of Prices to the Extended Consumer).

“It starts at this moment of high inflation of coffees to be made, I wouldn’t exactly say a tradeout [troca], although he does look for cheaper brands. In this context he [consumidor] makes a decrease in his average ticket, so he is literally consuming less coffee, this is the worst scenario that we could have”, said the Euromonitor analyst at the coffee event.

And, if there is an accentuated crisis in coffee, there will be a crisis for producers in Minas Gerais, the largest Brazilian producer and a state where coffee growers have faced periods of productivity declines due to climatic factors. And there is, in the short term, a promising future.

According to data from the Secretary of Agriculture, Livestock and Supply of Mines, coffee farming suffered from drought and frost over the course of last year, when 21.45 million bags of coffee were harvested, and projects a 2023 already with impacts such as the identification of a water deficit in some producing regions.

In 2022, despite the problems, there was a slight increase, with 22.03 million bags. Culture is practiced in 451 cities in Minas.

Global warming is a threat mainly to Brazilian Arabica coffee, which adapts more easily to colder regions, such as those in Minas Gerais, and is more sensitive than canephora —grown in states such as Espírito Santo and Rondônia and more resistant to heat.

“There’s no way for us to think about growing, evolving, with the climate challenges we have, and it’s not from now […] It is something that has really impacted us directly and, for that, we have genetic improvement with genes that are more tolerant to climate and high temperatures”, said Marcos Matos, general director of Cecafé (Council of Coffee Exporters of Brazil).

According to him, there are several ways to try to mitigate climate impacts, and they also include good practices in agriculture and logistics in the country. “We also have logistics to discuss, our ports, which are not consistent with global trends. We have seen ships growing, reaching 23,000, 24,000 containers. And when a larger ship enters Santos for everything.”

RELEASES

In the midst of these discussions, brands presented products and signed agreements related to the theme at the international fair.

Yara, which operates in the plant nutrition sector, signed a partnership with Cooxupé, the world’s largest coffee cooperative based in Guaxupé (MG), to study the viability of supplying green fertilizer.

The goal is to decarbonize the chain and offer consumers a more sustainable choice, as the input is produced with low carbon emissions.

Nespresso, on the other hand, launched an organic coffee, for two lines, produced in 78 farms in three regions of Minas Gerais and Alta Mogiana (SP), after three years of monitoring the crops.

“It is very much in line with our sustainability strategy of promoting more regenerative agriculture, with less impact in terms of carbon footprint, for example, and organic is one of the first steps that we are showing the world on this path” , said Cecilia Soares, brand sustainability manager.

Nescafé, on the other hand, launched a special coffee (with sensory notes of dried fruits, molasses and brown sugar) called social coffee, with profits reverted to the project itself, a partnership with two consultancies and young farmers from Chapada Diamantina (BA).

“This is not just an obligation, it’s a will, because we can transform lives through the things we do […] We have this in many areas and one of the best ways to do this is not philanthropy, it’s how we can contribute to improving our business model and that’s what we’re doing here. It’s what we call creating shared value,” said Marcelo Melchior, CEO of Nestlé Brazil.