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Coffee price increase: good news for Colombian producers, not for Turkish consumers

Price of coffee beans has never been higher in 10 years. For Colombia, it means more revenue despite a smaller production while in Turkey prices skyrocket with inflation.

coffee beans
Price of coffee beans has reached its highest levels in 10 years | © Hans Ripa

Roberto Vélez, the president of the national federation of coffee growers of Colombia shared his enthusiasm with his digital audience during the remote National Coffee Growers Congress on November 30.

He explained the revenue coming from the production of coffee would account for 1% of Colombia’s gross domestic product in 2021. It would be a first since 2002.

The value of the coffee harvest in 2021 will likely be between US $11 billion and 12 billion. The value jumped by 23% from last year.

Colombia will export $3.4 billion-worth of coffee beans this year, which is about 9% of the country’s total revenue generated by export.

Colombia’s coffee producers have a good year.

Yet, Colombia’s coffee production will decrease by 7% in 2021 compared to 2020. But the low production is compensated by the highest prices of the commodity the market has seen in 10 years.

In New York’s Intercontinental Exchange, coffee reached its highest price since 2011. In the meantime, the International Coffee Association’s benchmark price recorded a 85% increase from last year.

Uncertainty about global supply because of Brazil low production

In its October report, the International Coffee Association projects the global coffee consumption to rise by 1.9% in 2021/20 to 167.15 million bags of 60kg compared to 2019/20. Moreover, the world total production only increased by 0.4% in coffee year 2020/21, even if it’s 8.6% higher than the average production of the last 10 years.

But the worldwide price increase is actually driven by “concerns over the supply from important origins.

The market conditions are volatile and on the rise because Brazil, one of the largest coffee producers in the world, has experience unfavorable weather conditions for coffee.

During the year, Brazil’s coffee production suffered from drought, along with low temperatures and frost. Moreover, other large producers like Ethiopia or Vietnam bring uncertain perspectives. Cases of Covid-19 in Vietnam worry authorities and Ethiopia is close to a civil war in Tigray.

But in Turkey, where coffee used to be cultivated, the rise in coffee prices isn’t welcomed the same way.

Coffee prices soar in Turkey

In fact, coffee prices for the end consumers is said to have increased threefold in less than a year in Turkey.

On top of the price of coffee beans, shipping costs have soared as the maritime traffic is jammed.

To make things worse, the Turkish lira reached record lows, accelerating the inflation rate in the country, which has been above 10% since 2018. The high inflation increases prices of goods fast.

After sugar and oil, Turkey decided to limit the sale of coffee as supply and stock is low, Sözcü reports. Moreover, coffee houses may mix more Robusta in their products, a cheaper coffee bean but of lower quality than Arabica, which is a coffee species threatened by global warming in the coming years.

In Colombia, the minister of Agriculture and Rural development invited coffee growers to take advantage of the good prices to renew their coffee plantations and maintain high productivity.

Prices of coffee beans had decreased in the past years and the industry has also been suffering from the Covid-19 pandemic when people only drink coffee at home.

But the tensions of supply in the coffee market is expected to last until 2023 at least.

Read more about Turkey

Source
Coffee market report, International coffee organization, October 2021, Free access, PDF

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